Mar 31, 2023
Deepak Fertlisers And Petrochemicals Corporation Limited (âthe Company") is a company domiciled in India, with its registered office at Pune, Maharashtra, India. The Company has been registered under the provisions of the Indian Companies Act and its equity shares are listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (âBSE") in India.
The Company is primarily engaged in the business of manufacture, trading and sale of bulk chemicals. The Company also has operations in value added real estate.
These standalone financial statements were approved for issue in accordance with the resolution of the Board of Directors on May 17, 2023.
This note provides a list of the significant accounting policies adopted in the preparation of these standalone financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (''Ind AS'') notified under Section 133 of the Companies Act, 2013 (âthe Act") read with the Companies (Indian Accounting Standards) Rules, 2015 notified, as amended thereafter and other relevant provisions of the Act.
The standalone financial statements have been prepared on an accrual basis and under the historical cost convention, except for the following assets and liabilities which have been measured at fair value:
⢠Derivative financial instruments;
⢠Certain financial assets and liabilities measured at fair value (refer accounting policy on financial instruments); and
⢠Employee defined benefits plans - plan assets are measured at fair value.
The standalone financial statements are presented in Indian Rupees (âINR"), which is also the Company''s functional currency and all values are rounded off to the nearest Lakhs, except when otherwise indicated. Wherever, an amount is presented as INR ''0'' (zero) it construes value less than '' 50,000.
The preparation of the Company''s standalone financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities effected in future periods.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year, are described below. The Company has based its assumptions and estimates on parameters available when the standalone financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Where the final outcome of these matters is different from the amounts initially recorded, such differences will impact the current and deferred tax provisions in the period in which the tax determination is made. The assessment of probability involves estimation of a number of factors including future taxable income.
The Management reviews the estimated useful lives and residual value of PPE at the end of each reporting period. Factors such as changes in the expected level of usage, number of shifts of production, technological developments and product life-cycle, could significantly impact the economic useful lives and the residual values of PPE, consequently leading to a change in the future depreciation charge.
Employee benefit obligations are determined using independent actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual results in the future. These include the determination of the discount rate, future salary increases, experience of employee departures and mortality rates. Due to the complexities involved in the valuation and its long-term nature, employee benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
From time to time, the Company is subject to legal proceedings, the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount of the charge/ expense can be reasonably estimated. Significant judgement is made when evaluating, among other factors, the probability of unfavourable outcomes and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions are made for the changes in facts and circumstances. Contingent liabilities are disclosed in the notes forming part of the standalone financial statements. Contingent assets are not disclosed in the standalone financial statements unless an inflow of economic benefits is probable.
The Company reviews its carrying value of investment in subsidiaries carried at cost (net of impairment, if any) annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for in the standalone Statement of Profit and Loss.
When the fair values of financial assets and financial liabilities recorded in the Balance Sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash flow (âDCF") model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing their fair values. Judgements include consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair values of financial instruments.
The Company assesses impairment based on the expected credit loss (âECL") model on trade receivables. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables.
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assets'' recoverable amount. An assets'' recoverable amount is the higher of an asset''s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset unless the asset does
not generate cashflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and it is written down to its recoverable amount. In assessing value in use, the estimated future cashflows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risk specific to the asset. In determining fair value less cost of disposal, recent market transactions are taken in account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share price for publicly traded entities or other available fair value indicators.
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.
An asset is treated as current when:
⢠It is expected to be realised or intended to be sold or consumed in the normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is expected to be realised within twelve months after the reporting period; or
⢠It is a cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
The Company classifies all other assets as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is due to be settled within twelve months after the reporting period; or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle for the purpose of current and non-current classification of assets and liabilities.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer i.e. when the customer is able to direct the use of the transferred goods or rendering of services and obtains substantially all of the remaining benefits at an amount that reflects the consideration entitled in exchange for those goods or services. The policy of recognizing the revenue is determined by the five-stage model specified in Ind AS 115 âRevenue from contracts with customers".
Revenue is recognised upon transfer of control of promised goods to customers for an amount that reflects the consideration which the Company expects to receive in exchange for those goods. Revenue from the sale of goods is recognised at the point in time when control is transferred to the customer which is usually on dispatch/ delivery of goods, based on contracts with the customers. Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, price concessions, incentives, and returns, if any, as specified in the contracts with the customers. Revenue excludes taxes collected from customers on behalf of the government. Accruals for discounts/incentives and returns are estimated (using the most likely method) based on accumulated
experience and underlying schemes and agreements with customers. Due to the short nature of credit period given to customers, there is no financing component in the contract.
Sale of services are recognised on satisfaction of performance obligation towards rendering of such services.
Interest Income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income from investments in shares is recognised when the owner''s right to receive the payment is established.
An item of property plant and equipment (''PPE'') is recognised as an asset if it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably. These recognition principles are applied to the costs incurred initially to acquire an item of PPE, to the pre-operative and trial run costs incurred (net of sales), if any and also to the costs incurred subsequently to add to, replace part of, or service it and subsequently carried at cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of PPE includes interest on borrowings directly attributable to the acquisition, construction or production of a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to be made ready for its intended use or sale. Borrowing costs and other
directly attributable cost are added to the cost of those assets until such time as the assets are substantially ready for their intended use, which generally coincides with the commissioning date of those assets.
The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision is met. Machinery spares that meet the definition of PPE are capitalised and depreciated over the useful life of the principal item of an asset. All other repair and maintenance costs, including regular servicing, are recognised in the standalone Statement of Profit and Loss as incurred. When a replacement occurs, the carrying value of the replaced part is de-recognised. Where an item of property, plant and equipment comprises major components having different useful lives, these components are accounted for as separate items.
An item of property, plant and equipment is derecognized upon disposal or when no future benefits are expected from its use or disposal. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised within other income/expenses in the statement of profit and loss.
PPE acquired and put to use for projects are capitalised and depreciation thereon is included in the project cost till the project is ready for commissioning. Depreciation on PPE (except leasehold improvements) is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives. However, leasehold improvements are depreciated on a straight-line method over the shorter of their respective useful lives or the tenure of the lease arrangement. Freehold land is not depreciated. Schedule II to the Act prescribes the useful lives for various class of assets.
For certain class of assets, based on technical evaluation and assessment, Management believes that the useful lives adopted by it reflect the periods over which these assets are expected
to be used. Accordingly, for those assets, the useful lives estimated by the management are different from those prescribed in the Schedule. Management''s estimates of the useful lives for various class of PPE are as given below:
Name of assets |
Estimated useful life (in years) |
Computers - Servers and Networks |
3 - 6 |
End User Devices such as desktops and laptops |
3 - 6 |
Vehicles |
4 - 7 |
Buildings (other than factory buildings) with RCC frame structure |
61 |
Factory buildings |
Various estimated lives upto 30 years. |
Plant and equipment including office and laboratory equipments |
Various estimated lives upto 25 years. WNA III plant is depreciated at 25.88% on the WDV method |
Windmill |
19 |
Plant & machinery used for generation of power through gas |
40 |
Furnitures and Fixtures |
5-10 |
Projects under commissioning and other CWIP are carried at cost, comprising direct cost, related incidental expenses and attributable borrowing cost. Subsequent expenditures relating to property, plant and equipment are capitalised only when it is probable that future economic benefit associated with these will flow to the Company and the cost of the item can be measured reliably. Advances given to acquire property, plant and equipment are recorded as non-current assets and subsequently transferred to CWIP on acquisition of related assets.
Intangible assets are initially recognized at cost. Following initial recognition, intangible assets with finite useful life are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected
in the standalone Statement of Profit and Loss in the period in which the expenditure is incurred.
The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the standalone Statement of Profit and Loss when the asset is derecognized.
Name of assets |
Estimated useful life (in years) |
Computer software |
3 to 8 |
License fees |
3 to 8 |
Operating rights |
10 |
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset, that necessarily takes a substantial period of time
to get ready for its intended use, are capitalised as a part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs. Investment income earned on the temporary investment of specific borrowings is deducted from the borrowing costs eligible for capitalisation.
Investment properties are land and buildings that are held for long term lease rental yields and/ or for capital appreciation. Investment properties are initially recognised at cost including transaction costs. Subsequently investment properties comprising buildings are carried at cost less accumulated depreciation and accumulated impairment losses, if any. Subsequent expenditure is capitalised to the asset''s carrying amount only when it is probable that future economic benefits associated with expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred.
Depreciation on buildings is provided over the estimated useful lives as specified in note (c) above. The residual values estimated useful lives and depreciation method of investment properties are reviewed, and adjusted on prospective basis as appropriate, at each reporting date. The effects of any revision are included in the standalone Statement of Profit and Loss when the changes arise.
An investment property is de-recognised when either the investment property has been disposed of or do not meet the criteria of investment property i.e. when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the standalone Statement of Profit and Loss in the period of de-recognition.
Transfers to (or from) investment property are made only when there is a change in use. If the significant ancillary income is generated from services provided along with the rental income and/or the company creates any assets or facilitates activities that generate service income, such investment property shall be reclassified as property, plant, and equipment. If the ancillary and/or service income remains insignificant, the asset shall continue to remain as investment property. The classification may also change if the management decides to sell the property.
Transfers between investment property,
owner-occupied property and inventories do not change the carrying amount of the property transferred and they do not change the cost of that property for measurement or disclosure purposes.
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. Non-current assets classified as held for sale are measured at lower of their carrying amount and fair value less cost to sell. Non-current assets classified as held for sale are not depreciated or amortised from the date when they are classified as held for sale. Non-current assets classified as held for sale are presented separately from the other assets and liabilities in the standalone balance sheet.
The functional currency of the Company (i.e. the currency of the primary economic environment in which the Company operates) is the Indian Rupee (''). On initial recognition, all foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction.
Monetary assets and Liabilities, denominated in a foreign currency, are translated at the exchange rate prevailing on the Balance Sheet date and the resultant exchange gains or losses are recognised in the standalone Statement of Profit and Loss. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction.
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets: Initial recognition and
measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at amortised cost
⢠Debt instruments at fair value through other comprehensive income (FVOCI)
⢠Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVPL)
⢠Equity instruments measured at fair value through other comprehensive income (FVOCI)
A ''debt instrument'' is measured at the amortised cost if
both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows; and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the standalone Statement of Profit and Loss. The losses arising from impairment are recognised in the standalone Statement of Profit and Loss. This category generally applies to trade and other receivables.
Debt instrument at FVOCI
A ''debt instrument'' is classified as at the FVOCI if both of
the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets; and
b) The asset''s contractual cash flows represent SPPI. Debt instruments included within the FVOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the other comprehensive income (OCI). On derecognition of the asset, cumulative gain or loss previously recognized in OCI is reclassified to the standalone Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
FVPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVOCI, is classified as at FVPL. In addition, the Company may elect to designate a debt instrument, which otherwise meets amortised cost or FVOCI criteria, as at FVPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch''). Debt instruments included within the FVPL category are measured at fair value with all changes recognised in the standalone Statement of Profit and Loss.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument by-instrument basis. The classification is made on initial recognition and is irrevocable. If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI.
There is no recycling of the amounts from OCI to the standalone Statement of Profit and Loss, even on sale of investment. However the Company may transfer the cumulative gain or loss within equity. Equity instruments included within the FVPL category are measured at fair value with all changes recognised in the standalone Statement of Profit and Loss.
Investments in subsidiaries and associates
Investments in subsidiaries and associates are carried at cost less impairment as per Ind AS 27 Consolidated and Separate Financial Statements.
Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries, the difference between net disposal proceeds and the carrying amounts are recognized in the standalone Statement of Profit and Loss.
Impairment of financial assets
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECLs (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised as an impairment gain or loss in the standalone Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Company''s balance sheet) when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Financial liabilities
Financial liabilities are classified and measured at amortised cost or FVPL. A financial liability is classified as at FVPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains and losses, including any interest expense, are recognised in Statement of Profit and Loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in standalone Statement of Profit and Loss. Any gain or loss on derecognition is also recognized in standalone Statement of Profit and Loss.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the standalone Statement of Profit and Loss.
Derivative financial instruments
The Company uses various types of derivative financial instruments to hedge its currency and interest risk etc. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the standalone Balance Sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at the time of issuance of guarantee. The liability is initially measured at fair
value and is subsequently measured at the higher of the amount of loss allowance determined, or the amount initially recognised less, the cumulative amount of income recognised.
Fair value of financial instruments
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value.
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a define period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified assets, the Company assesses whether: (i) the contact involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
As a lessee, the Company recognises a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right of use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right of use asset or the end of the lease term.
The estimated useful lives of right of use assets are determined on the same basis as those of property and equipment. In addition, the right of use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company''s incremental borrowing rate. For leases with reasonably similar characteristics, the Company, on a lease by lease basis, may adopt either the incremental borrowing rate specific to the lease or the incremental borrowing rate for the portfolio as a whole. Lease payments included in the measurement of the lease liability comprise the fixed payments, including in-substance fixed payments and lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option.
The lease liability is measured at amortised cost using the effective interest method. The Company has elected not to recognise right of use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The Company has applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date.
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Cost of raw materials, traded goods, packing materials and stores and spares comprises cost of purchases and cost of finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs of purchased inventory are determined after deducting rebates and discounts.
⢠Raw materials, traded goods, packing materials and stores and spares are valued at the lower of cost and net realisable value. Cost is determined on the basis of moving weighted average method. The aforesaid items are valued below cost if the finished products in which they are to be incorporated are expected to be sold at a loss.
⢠Finished goods and by-products including those held for captive consumption are valued at the lower of cost and net realisable value. Cost is determined on actual cost basis. Cost of finished goods includes taxes and duties, as applicable. Variances, exclusive of abnormally low volume and operating performance, are adjusted to inventory. Stock-in-trade is valued at lower of cost and net realisable value.
⢠Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
The Company assesses at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assets'' recoverable amount. An assets'' recoverable amount is the higher of an asset''s fair value less costs of disposal and its value in use. The recoverable amount is
determined for an individual asset unless the asset does not generate cashflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and it is written down to its recoverable amount.
In assessing value in use, the estimated future cashflows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risk specific to the asset. In determining fair value less cost of disposal, recent market transactions are taken in account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share price for publicly traded entities or other available fair value indicators. For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment loss no longer exist or has decreased. If such indication exists, the Company estimates the assets'' or CGU''s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assets'' recoverable amount, since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
Such reversal is recognised in the standalone Statement of Profit and Loss.
Provisions are recognised when the Company has a present obligation (legal or constructive), as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
When the Company expects some or alt of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the standalone Statement of Profit and Loss. net of any reimbursements.
If the effect of time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimates.
Employee benefits consist of provident fund, superannuation fund, gratuity fund, compensated absences, long service awards, post-retirement medical benefits, directors'' retirement obligations and family benefit scheme.
Payments to a defined contribution retirement benefit scheme for eligible employees in the form of provident fund, pension scheme, employee state insurance and superannuation fund are charged as an expense as they fall due. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made.
For defined benefit schemes in the form of gratuity fund, the cost of providing benefits is actuarially determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date. The retirement
benefit obligation recognised in the standalone balance sheet represents the present value of the defined benefit obligation as reduced by the fair value of scheme assets. The present value of the said obligation is determined by discounting the estimated future cash outflows, using market yields of government bonds of equivalent term and currency to the liability. The interest income / (expense) are calculated by applying the discount rate to the net defined benefit liability or asset.
The net interest income / (expense) on the net defined benefit liability is recognised in the standalone Statement of Profit and Loss. Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling (if any), are recognised immediately in the standalone Balance Sheet with a corresponding charge or credit to retained earnings through OCI in the period in which they occur Remeasurements are not reclassified to the standalone Statement of Profit and Loss in subsequent periods. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in the standalone Statement of Profit and Loss as past service cost.
The short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include compensated absences such as paid annual leave and performance incentives which are expected to occur within twelve months after the end of the period in which the employee renders the related services.
The cost of compensated absences is accounted as under:
(a) In case of accumulating compensated absences, when employees render service that increase their entitlement of future compensated absences; and
(b) In case of non-accumulating compensated absence, when the absences occur
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability. The cost of providing benefits is actuarially determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date. Long Service Awards are recognised as a liability at the present value of the obligation at the Balance Sheet date. All gains/losses due to actuarial valuations are immediately recognised in the standalone Statement of Profit and Loss.
The Company uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its foreign currency risks and interest rate risks respectively as applicable. Such derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently re-measured at fair value at the end of each reporting period. At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship which is designated.
Cash flow hedges that qualify for hedge accounting: The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in ''other comprehensive income'' in cash flow hedging reserve within equity limited to the cumulative change in fair value of
the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in the standalone Statement of Profit and Loss. Amounts accumulated in equity are reclassified to the standalone Statement of Profit and Loss in the periods in which the hedged item affects the profit or loss.
If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognised in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss previously recognised in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
Derivatives that are not designated as hedges: The Company enters into certain derivative contracts to hedge foreign exchange risks which are not designated as hedges. Such derivative contracts are accounted for at each reporting date at fair value through the standalone Statement of Profit and Loss.
C ash a nd cash equ iva lents i n the ba lance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.
The Company recognizes a liability to make cash distributions to equity shareholders when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorized when it is approved by the shareholders of the Company.
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as a government grant.
Current income tax assets and liabilities are measured at the amounts expected to be recovered from or paid to the taxation authorities in accordance with the Income Tax Act, 1961. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted at the reporting date.
Current income tax relating to items recognized outside profit and loss is recognized outside profit and loss (either in other comprehensive income or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable
tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred income tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable temporary differences except when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or in respect of taxable temporary differences associated with investment in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets on deductible temporary differences, the carry forward of unused tax credits and any unused tax losses are recognized to the extent that there is reasonably certainty that taxable profits will be available against which the deductible temporary differences and the carry forward of unused tax credits and tax losses can be utilized, except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
The carrying amount of deferred tax assets is reviewed at each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilized. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become reasonably certain that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset or liability is settled based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized outside profit and loss is recognized outside profit and loss (either in other comprehensive income or in equity). Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period. For the purposes of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of equity shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
Based on the âManagement approach" as defined in Ind AS 108: Operating Segments, the Chief Operating Decision Maker evaluates the Company''s performance and allocates resources based on an analysis of various performance indicators by business segments. Inter-segment sales and transfers are reflected at market prices.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the standalone financial statements as a whole. Common allocable costs
are allocated to each segment on an appropriate basis. Revenues, expenses, assets and liabilities, which are common to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been treated as âunallocated revenues/ expenses/ assets/ liabilities", as the case may be.
The Company accounts for the common control transactions in accordance with the ''pooling of interests'' method prescribed under Ind AS 103 - Business Combinations for common control transactions where all the assets and liabilities of transferor companies would be recorded at the book value as at the Appointed date.
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of economic resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the standalone financial statements.
A contingent asset is not recognized unless it becomes virtually certain that an inflow of economic benefits will arise. When an inflow of economic benefits is probable, contingent assets are disclosed in the standalone financial statements.
Contingent liabilities and contingent assets are reviewed at each balance sheet date.
There have been no changes in accounting policies during the financial year 2022-23.
Ministry of Corporate Affairs (âMCA") noti
Mar 31, 2022
1. Corporate Information
Deepak Fertlisers and Petrochemicals Corporation Limited ("the Company"! is a company domiciled in India, with its registered office at Pune, Maharashtra, India. The Company has been registered under the provisions of the Indian Companies Act and its equity shares are listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange ("BSE") in India.
The Company is primarily engaged in the business of manufacture, trading and sale of bulk chemicals. The Company also has operations in value added real estate.
These standalone financial statements were approved for issue in accordance with the resolution of the Board of Directors on May 25, 2022.
2. Significant Accounting Policies
This note provides a list of the significant accounting policies adopted in the preparation of these standalone financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (âInd AS'') notified under Section 133 of the Companies Act, 2013 ("the Act") read with the Companies (Indian Accounting Standards) Rules, 2015 notified, as amended thereafter and other relevant provisions of the Act.
The standalone financial statements have been prepared on an accrual basis and under the historical cost convention, except for the following assets and liabilities which have been measured at fair value:
⢠Derivative financial instruments;
⢠Certain financial assets and liabilities measured at fair value (refer accounting policy on financial instruments); and
⢠Employee defined benefits plans - plan assets are measured at fair value
The standalone financial statements are presented in Indian Rupees ("INR"), which is also the Company''s functional currency and all
values are rounded off to the nearest Lakhs, except when otherwise indicated. Wherever, an amount is presented as INR â0'' (zero) it construes value less than '' 50,000.
2.2 Significant accounting estimates, assumptions and judgements
The preparation of the Company''s standalone financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities effected in future periods.
Estimates, assumptions and judgements
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year, are described below. The Company has based its assumptions and estimates on parameters available when the standalone financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur
There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Where the final outcome of these matters is different from the amounts initially recorded, such differences will impact the current and deferred tax provisions in the period in which the tax determination is made. The assessment of probability involves estimation of a number of factors including future taxable income.
Useful lives of Property, plant and equipment (''PPE'')
The Management reviews the estimated useful lives and residual value of PPE at the end of each reporting period. Factors such as changes in the expected level of usage, number of shifts of production, technological developments and product life-cycle, could significantly impact the economic useful lives and the residual values of PPE, consequently leading to a change in the future depreciation charge.
Employee benefit obligations are determined using independent actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual results in the future. These include the determination of the discount rate, future salary increases, experience of employee departures and mortality rates. Due to the complexities involved in the valuation and its long-term nature, employee benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Provisions for Litigations and Claims
From time to time, the Company is subject to legal proceedings, the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a paym ent will be made and the amount of the charge/ expense can be reasonably estimated. Significant judgement is made when evaluating, among other factors, the probability of unfavourable outcomes and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions are made for the changes in facts and circumstances. Contingent liabilities are disclosed in the notes forming part of the standalone financial statements. Contingent assets are not disclosed in the standalone financial statements unless an inflow of economic benefits is probable.
Impairment of investment in subsidiaries
The Company reviews its carrying value of investment in subsidiaries carried at cost (net of
impairment, if any) annually or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for in the standalone Statement of Profit and Loss.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the Balance Sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow ("DCF") model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing their fair values. Judgements include consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair values of financial instruments.
Impairment of financial assets
The Company assesses impairment based on the expected credit loss ("ECLl model on trade receivables. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables.
Impairment of non-financial assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assets'' recoverable amount. An assets'' recoverable amount is the higher of an asset''s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset unless the asset does not generate cashflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and it is written down to its recoverable amount. In assessing value in use, the estimated future cashflows are discounted to their present
value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risk specific to the asset. In determining fair value less cost of disposal, recent market transactions are taken in account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share price for publicly traded entities or other available fair value indicators.
2.3 Summary of significant accounting policies(a) Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.
An asset is treated as current when:
⢠It is expected to be realised or intended to be sold or consumed in the normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is expected to be realised within twelve months after the reporting period; or
⢠It is a cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
The Company classifies all other assets as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is due to be settled within twelve months after the reporting period; or
⢠There is no unconditional right to defer the settlement of the liability
for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle for the purpose of current and non-current classification of assets and liabilities.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer i.e. when the customer is able to direct the use of the transferred goods or rendering of services and obtains substantially all of the remaining benefits at an amount that reflects the consideration entitled in exchange for those goods or services. The policy of recognizing the revenue is determined by the five-stage model specified in Ind AS 115 "Revenue from contracts with customers".
Revenue is recognised upon transfer of control of promised goods to customers for an amount that reflects the consideration which the Company expects to receive in exchange for those goods. Revenue from the sale of goods is recognised at the point in time when control is transferred to the customer which is usually on dispatch/ delivery of goods, based on contracts with the customers. Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, price concessions, incentives, and returns, if any as specified in the contracts with the customers. Revenue excludes taxes collected from customers on behalf of the government. Accruals for discounts/incentives and returns are estimated (using the most likely method) based on accumulated experience
and underlying schemes and agreements with customers. Due to the short nature of credit period given to customers, there is no financing component in the contract.
Sale of Services:
Sate of services are recognised on satisfaction of performance obligation towards rendering of such services.
Interest Income:
Interest Income from a financial asset is recognised when it is probabte that the economic benefits witt flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principat outstanding and at the effective interest rate applicable.
Dividend Income:
Dividend income from investments in shares is recognised when the owner''s right to receive the payment is established.
(c) Property, plant and equipment
An item of property plant and equipment (âPPE'') is recognised as an asset if it is probable that the future economic benefits associated with the item witt flow to the Company and its cost can be measured reliably. These recognition principtes are apptied to the costs incurred initiatty to acquire an item of PPE, to the pre-operative and triat run costs incurred (net of sates), if any and atso to the costs incurred subsequentty to add to, reptace part of, or service it and subsequentty carried at cost tess accumutated depreciation and accumutated impairment tosses, if any.
The cost of PPE inctudes interest on borrowings directty att ri but a bte to the acquisition, construction or production of a quatifying asset. A quatifying asset is an asset that necessarity takes a substantiat period of time to be made ready for its intended use or sate. Borrowing costs and other directty attributabte cost are added to the cost of those assets untit such time as the assets are substantiate ready
for their intended use, which generatty coincides with the commissioning date of those assets.
The present vatue of the expected cost for the decommissioning of an asset after its use is inctuded in the cost of the respective asset if the recognition criteria for a provision is met. Machinery spares that meet the definition of PPE are capitatised and depreciated over the usefut tife of the principat item of an asset. Att other repair and maintenance costs, inctuding regutar servicing, are recognised in the standatone Statement of Profit and Loss as incurred. When a reptacement occurs, the carrying vatue of the reptaced part is de-recognised. Where an item of property ptant and equipment comprises major components having different usefut tives, these components are accounted for as separate items.
An item of property ptant and equipment is derecognized upon disposat or when no future benefits are expected from its use or disposat. Gains and tosses on disposat of an item of property ptant and equipment are determined by comparing the proceeds from disposat with the carrying amount of property ptant and equipment, and are recognised within other income/expenses in the statement of profit and toss.
PPE acquired and put to use for projects are capitatised and depreciation thereon is inctuded in the project cost titt the project is ready for commissioning. Depreciation on PPE (except teasehotd improvements) is catcutated using the straight-tine method to attocate their cost, net of their residuat vatues, over their estimated usefut tives. However, teasehotd improvements are depreciated on a straight-tine method over the shorter of their respective usefut tives or the tenure of the tease arrangement. Freehotd tand is not depreciated. Schedute II to the Act prescribes the usefut tives for various ctass of assets.
For certain class of assets, based on technical evaluation and assessment, Management believes that the useful lives adopted by it reflect the periods over which these assets are expected to be used. Accordingly for those assets, the
useful lives estimated by the management are different from those prescribed in the Schedule. Management''s estimates of the useful lives for various class of PPE are as given below:
Name of assets |
Estimated useful life (in years) |
|
Computers - Servers and Networks |
3 - 6 |
|
End User Devices such as desktops and laptops |
3 - 6 |
|
Vehicles |
4 - 7 |
|
Buildings (other than factory buildings) with RCC frame structure |
61 |
|
Factory buildings |
Various estimated lives upto |
30 years. |
Plant and equipment including office and laboratory equipments |
Various estimated lives upto 25 years. WNA III plant is depreciated at 25.88% on the WDV method |
|
Windmill |
19 |
|
Plant & machinery used for generation of power through gas |
40 |
|
Furnitures and Fixtures |
5-10 |
|
Special Vehicle |
10 |
Capital work in progress (CWIP)
Projects under commissioning and other CWIP are carried at cost, comprising direct cost, related incidental expenses and attributable borrowing cost. Subsequent expenditures relating to property plant and equipment are capitalised only when it is probable that future economic benefit associated with these will flow to the Company and the cost of the item can be measured reliably. Advances given to acquire property, plant and equipment are recorded as non-current assets and subsequently transferred to CWIP on acquisition of related assets.
I ntangible assets are initially recognized at cost. Following initial recognition, intangible assets with finite useful life are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in the standalone Statement of Profit and Loss in the period in which the expenditure is incurred.
The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the standalone Statement of Profit and Loss when the asset is derecognized.
Name of assets |
Estimated useful life (in |
years) |
|
Computer software |
3 to 8 |
License fees |
3 to 8 |
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset, that necessarily takes a substantial period of time to get ready for its intended use, are capitalised as a part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost
also includes exchange differences to the extent regarded as an adjustment to the borrowing costs. Investment income earned on the temporary investment of specific borrowings is deducted from the borrowing costs eligible for capitalisation.
Investment properties are land and buildings that are held for long term lease rental yields and/ or for capital appreciation. Investment properties are initially recognised at cost including transaction costs. Subsequently investment properties comprising buildings are carried at cost less accumulated depreciation and accumulated impairment losses, if any. Subsequent expenditure is capitalised to the asset''s carrying amount only when it is probable that future economic benefits associated with expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred.
Depreciation on buildings is provided over the estimated useful lives as specified in note (c) above. The residual values estimated useful lives and depreciation method of investment properties are reviewed, and adjusted on prospective basis as appropriate, at each reporting date. The effects of any revision are included in the standalone Statement of Profit and Loss when the changes arise.
An investment property is derecognised when either the investment property has been disposed of or do not meet the criteria of investment property i.e. when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the standalone Statement of Profit and Loss in the period of derecognition.
(g) Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. Non-current assets classified as held for sale are measured at lower of their carrying amount and fair value less cost to sell. Non-current assets classified as held for sale are not depreciated or amortised from the date when they are classified as held for sale. Non-current assets classified as held for sale are presented separately from the other assets and liabilities in the standalone balance sheet.
(h) Foreign currency transactions and balances
The functional currency of the Company (i.e. the currency of the primary economic environment in which the Company operates) is the Indian Rupee (''). On initial recognition, all foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. Monetary assets and liabilities, denominated in a foreign currency, are translated at the exchange rate prevailing on the Balance Sheet date and the resultant exchange gains or losses are recognised in the standalone Statement of Profit and Loss. Nonmonetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction.
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets: Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial
assets not recorded at fair value through profit or toss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sates of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sett the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at amortised cost
⢠Debt instruments at fair value through other comprehensive income (FVOCI)
⢠Debt instruments, derivatives and equity instruments at fair vatue through profit or toss (FVPL)
⢠Equity instruments measured at fair vatue through other comprehensive income (FVOCI)
Debt instruments at amortised cost
A âdebt instrument'' is measured at the amortised cost if both the fottowing conditions are met:
a) The asset is hetd within a business modet whose objective is to hotd assets for cottecting contractuat cash flows; and
b) Contractuat terms of the asset give rise on specified dates to cash flows that are sotety payments of principat and interest (SPPI) on the principat amount outstanding.
After initial measurement, such financiat assets are subsequentty measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is catcutated by taking into account any discount or premium on acquisition and fees or costs that are an integrat part of the EIR. The EIR amortisation is inctuded in other income in the standatone Statement of Profit and Loss. The tosses arising from impairment are recognised in the standatone Statement of Profit and Loss. This category generatty appties to trade and other receivabtes.
Debt instrument at FVOCI
A âdebt instrument'' is ctassified as at the FVOCI if both of the fottowing criteria are met:
a) The objective of the business modet is achieved both by cottecting contractuat cash flows and setting the financiat assets; and
b) The asset''s contractuat cash flows represent SPPI. Debt instruments inctuded within the FVOCI category are measured initiatty as wett as at each reporting date at fair vatue. Fair vatue movements are recognised in the other comprehensive income (OCI). On derecognition of the asset, cumutative gain or toss previousty recognized in OCI is rectassified to the standatone Statement of Profit and Loss. Interest earned whitst hotding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVPL
FVPL is a residuat category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVOCI, is ctassified as at FVPL. In addition, the Company may etect to designate a debt instrument, which otherwise meets amortised cost or FVOCI criteria, as at FVPL. However, such etection is attowed onty if doing so reduces or etiminates a measurement or recognition inconsistency (referred to as âaccounting mismatch''). Debt instruments inctuded within the FVPL category are measured at fair vatue with att changes recognised in the standatone Statement of Profit and Loss.
Equity investments
AH equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument -by-instrument basis. The classification is made on initial recognition and is irrevocable. If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI.
There is no recycling of the amounts from OCI to the standalone Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity. Equity instruments included within the FVPL category are measured at fair value with all changes recognised in the standalone Statement of Profit and Loss.
Investments in subsidiaries and associates
Investments in subsidiaries and associates are carried at cost less impairment as per Ind AS 27 Consolidated and Separate Financial Statements.
Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries, the difference between net disposal proceeds and the carrying amounts are recognized in the standalone Statement of Profit and Loss.
Impairment of financial assets
The Company recognizes loss allowance using the expected credit loss (ECL)
model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECLs (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised as an impairment gain or loss in the standalone Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Company''s balance sheet) when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpassthrough'' arrangement and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and
rewards of ownership. When it has neither transferred nor retained substantially aft of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company afso recognises an associated fiabifity. The transferred asset and the associated fiabifity are measured on a basis that reflects the rights and obfigations that the Company has retained.
Financial liabilities
Financial liabilities are classified and measured at amortised cost or FVPL. A financial liability is classified as at FVPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains and fosses, incfuding any interest expense, are recognised in Statement of Profit and Loss. Other financiaf fiabifities are subsequentfy measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and fosses are recognised in standafone Statement of Profit and Loss. Any gain or foss on derecognition is afso recognized in standafone Statement of Profit and Loss.
Borrowings
Borrowings are initially recognised at fair vafue, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the estabfishment of foan facifities are recognised as transaction costs of the foan to the extent that it is probabfe that some or aff of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extent there is no evidence
that it is probabfe that some or aff of the facility will be drawn down, the fee is capitafised as a prepayment for fiquidity services and amortised over the period of the facility to which it relates.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantiaffy modified, such an exchange or modification is treated as the derecognition of the originaf fiabifity and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the standafone Statement of Profit and Loss.
Derivative financial instruments
The Company uses various types of derivative financiaf instruments to hedge its currency and interest risk etc. Such derivative financiaf instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair vafue. Derivatives are carried as financiaf assets when the fair vafue is positive and as financiaf fiabifities when the fair value is negative.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the standalone Balance Sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settfe them on a net basis or to reafise the asset and settle the liability simultaneously.
Financiaf guarantee contracts
Financial guarantee contracts are recognised as a financiaf fiabifity at the time of issuance of guarantee. The fiabifity is initially measured at fair value and is
subsequently measured at the higher of the amount of toss allowance determined, or the amount initially recognised less, the cumulative amount of income recognised.
Fair value of financial instruments
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair vatue include discounted cash flow analysis, avaitabte quoted market prices and deater quotes. Att methods of assessing fair vatue resutt in generat approximation of vatue.
(j) Leases
A contract is, or contains, a tease if the contract conveys the right to control the use of an identified asset for a define period of time in exchange for consideration. To assess whether a contract conveys the right to controt the use of an identified assets, the Company assesses whether: (i) the contact involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
As a lessee, the Company recognises a right of use asset and a lease liability at the tease commencement date. The right of use asset is initially measured at cost, which comprises the initiat amount of the lease liability adjusted for any tease payments made at or before the commencement date, ptus any initiat direct costs incurred and an estimate of costs to dismantte and remove the undertying asset or to restore the undertying asset or the site on which it is located, less any lease incentives received. The right of use asset is subsequently depreciated using the straight-tine method from the commencement date to the eartier of the end of the usefut tife of the right of use asset or the end of the
lease term. The estimated useful lives of right of use assets are determined on the same basis as those of property and equipment. In addition, the right of use asset is periodically reduced by impairment tosses, if any, and adjusted for certain remeasurements of the tease tiabitity.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate impticit in the tease or, if that rate cannot be readily determined, the Company''s incrementat borrowing rate. For teases with reasonably similar characteristics, the Company, on a tease by tease basis, may adopt either the incrementat borrowing rate specific to the tease or the incrementat borrowing rate for the portfotio as a whote. Lease payments inctuded in the measurement of the tease tiabitity comprise the fixed payments, inctuding in-substance fixed payments and lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option.
The tease tiabitity is measured at amortised cost using the effective interest method. The Company has etected not to recognise right of use assets and tease tiabitities for short-term teases that have a lease term of 12 months or tess and teases of tow-vatue assets. The Company recognises the tease payments associated with these teases as an expense on a straight-tine basis over the tease term. The Company has apptied a singte discount rate to a portfotio of teases of simitar assets in simitar economic environment with a simitar end date.
The determination of whether an arrangement is (or contains) a tease is based on the substance of the arrangement at the inception of the tease. The arrangement is, or contains, a tease if futfitment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys
a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Cost of raw materials, traded goods, packing materials and stores and spares comprises cost of purchases and cost of finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs of purchased inventory are determined after deducting rebates and discounts.
⢠Raw materials, traded goods, packing materials and stores and spares are valued at the lower of cost and net realisable value. Cost is determined on the basis of moving weighted average method. The aforesaid items are valued below cost if the finished products in which they are to be incorporated are expected to be sold at a loss.
⢠Finished goods and by-products including those held for captive consumption are valued at the lower of cost and net realisable value. Cost is determined on actual cost basis. Cost of finished goods includes taxes and duties, as applicable. Variances, exclusive of abnormally low volume and operating performance, are adjusted to inventory. Stock-intrade is valued at lower of cost and net realisable value.
⢠Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
(l) Impairment of non-financial assets
The Company assesses at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assets'' recoverable amount. An assets'' recoverable amount is the higher of an asset''s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset unless the asset does not generate cashflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and it is written down to its recoverable amount.
I n assessing value in use, the estimated future cashflows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risk specific to the asset. In determining fair value less cost of disposal, recent market transactions are taken in account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share price for publicly traded entities or other available fair value indicators. For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment loss no longer exist or has decreased. If such indication exists, the Company estimates the assets'' or CGU''s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assets'' recoverable amount, since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined, net of depreciation, had no impairment toss been recognised for the asset in prior years.
Such reversal is recognised in the standalone Statement of Profit and Loss.
Provisions are recognised when the Company has a present obtigation (tegat or constructive), as a result of a past event, it is probable that an outflow of resources embodying economic benefits witt be required to settte the obtigation and a retiabte estimate can be made of the amount of the obtigation.
When the Company expects some or att of a provision to be reimbursed, for exampte, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the standatone Statement of Profit and Loss. net of any reimbursements.
If the effect of time value of money is materiat, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the tiabitity. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost. Provisions are reviewed at each batance sheet date and are adjusted to reflect the current best estimates.
Employee benefits consist of provident fund, superannuation fund, gratuity fund, compensated absences, tong service awards, post-retirement medicat benefits, directors'' retirement obligations and family benefit scheme.
Post-employment benefit plansDefined contribution plans
Payments to a defined contribution retirement
benefit scheme for eligible employees in the form of
provident fund and superannuation fund are charged as an expense as they fatt due. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obtigations, apart from the contributions made.
For defined benefit schemes in the form of gratuity fund, the cost of providing benefits is actuariafly determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date. The retirement benefit obtigation recognised in the standatone batance sheet represents the present value of the defined benefit obligation as reduced by the fair vatue of scheme assets. The present vatue of the said obtigation is determined by discounting the estimated future cash outflows, using market yi etds of government bonds of equivalent term and currency to the liability. The interest income / (expense) are calculated by apptying the discount rate to the net defined benefit liability or asset.
The net interest income / (expense) on the net defined benefit tiabitity is recognised in the standatone Statement of Profit and Loss. Remeasurements, comprising of actuariat gains and tosses, the effect of the asset ceiting (if any), are recognised immediately in the standalone Batance Sheet with a corresponding charge or credit to retained earnings through OCI in the period in which they occur Remeasurements are not rectassified to the standatone Statement of Profit and Loss in subsequent periods. Changes in the present value of the defined benefit obtigation resutting from ptan amendments or curtailments are recognised immediately in the standatone Statement of Profit and Loss as past service cost.
The short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits inctude compensated absences such as paid annual leave and performance incentives which are expected to occur within twetve months after the end of the period in which the employee renders the related services.
The cost of compensated absences is accounted as under:
(a) In case of accumulating compensated absences, when employees render service that increase their entitlement of future compensated absences; and
(b) In case of non - accumulating compensated absence, when the absences occur.
Other long-term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability. The cost of providing benefits is actuarially determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date. Long Service Awards are recognised as a liability at the present value of the obligation at the Balance Sheet date. All gains/losses due to actuarial valuations are immediately recognised in the standalone Statement of Profit and Loss.
(o) Derivative financial instruments
The Company uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its foreign currency risks and interest rate risks respectively as applicable. Such derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value at the end of each reporting period. At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship which is designated.
Cash flow hedges that qualify for hedge accounting: The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in âother comprehensive income'' in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in the standalone Statement of Profit and Loss. Amounts accumulated in equity are reclassified to the standalone Statement of Profit and Loss in the periods in which the hedged item affects the profit or loss.
If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognised in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss previously recognised in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
Derivatives that are not designated as hedges: The Company enters into certain derivative contracts to hedge foreign exchange risks which are not designated as hedges. Such derivative contracts are accounted for at each reporting date at fair value through the standalone Statement of Profit and Loss.
Cash and cash equivalents in the balance sheet comprise cash at banks and on
hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.
The Company recognizes a liability to make cash distributions to equity shareholders when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorized when it is approved by the shareholders of the Company.
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as a government grant.
Current income tax assets and liabilities are measured at the amounts expected to be recovered from or paid to the taxation authorities in accordance with the Income Tax Act, 1961. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted at the reporting date.
Current income tax relating to items recognized outside profit and loss is recognized outside profit and loss (either in other comprehensive income or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred income tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable temporary differences except when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or in respect of taxable temporary differences associated with investment in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets on deductible temporary differences, the carry forward of unused tax credits and any unused tax losses are recognized to the extent that there is reasonably certainty that taxable profits will be available against which the deductible temporary differences and the carry forward of unused tax credits and tax losses can be utilized, except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a
business combination and at the time of the transaction, affects neither the accounting profit nor taxable profit or toss.
The carrying amount of deferred tax assets is reviewed at each reporting period and is reduced to the extent that it is no tonger probabte that sufficient taxable profits will be available to allow att or part of the deferred tax asset to be utitized. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become reasonabty certain that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset or tiabitity is settted based on tax rates and tax taws that have been enacted or substantivety enacted at the reporting date. Deferred tax relating to items recognized outside profit and toss is recognized outside profit and toss (either in other comprehensive income or in equity). Deferred tax items are recognized in corretation to the undertying transaction either in OCI or directly in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and tiabitities and when the deferred tax batances retate to the same taxation authority.
Basic earnings per share is catcutated by dividing the net profit or toss for the period attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period. For the purposes of catcutating dituted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of equity shares outstanding during the period are adjusted for the effects of att dilutive potential equity shares.
Based on the "Management approach" as defined in Ind AS 108: Operating Segments, the Chief Operating Decision Maker evaluates the Company''s performance and attocates resources based on an analysis of various performance indicators by business segments. Intersegment sates and transfers are reflected at market prices.
Segment poticies
The Company prepares its segment information in conformity with the accounting poticies adopted for preparing and presenting the standatone financiat statements as a whote. Common attocabte costs are attocated to each segment on an appropriate basis. Revenues, expenses, assets and tiabitities, which are common to the enterprise as a whote and are not attocabte to segments on a reasonabte basis, have been treated as "unallocated revenues/expenses/ assets/ liabilities", as the case may be.
The Company accounts for the common control transactions in accordance with the âpooling of interests'' method prescribed under Ind AS 103 - Business Combinations for common controt transactions where att the assets and liabilities of transferor companies would be recorded at the book vatue as at the Appointed date.
(w) Contingent Liability and Contingent Assets
A contingent liability is a possible obtigation that arises from past events whose existence witt be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the controt of the Company or a present obligation that is not recognized because it is not probable that an outflow of economic resources witt be required to settte the obtigation. A contingent tiabitity atso arises in extremety rare
cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the standalone financial statements.
A contingent asset is not recognized unless it becomes virtually certain that an inflow of economic benefits will arise. When an inflow of economic benefits is probable, contingent assets are disclosed in the standalone financial statements.
Contingent liabilities and contingent assets are reviewed at each balance sheet date.
(x) Changes in significant accounting policies
There have been no changes in accounting policies during the Financial year 2021-22 and 2020-21.
(y) Recent Pronouncements and note on COVID-19
1. Recent Accounting Pronouncements
The Ministry of Corporate Affairs (MCA) on 5 April 2022, vide Notification dated 23 March 2022 has issued Companies (Indian Accounting Standard) Amendment Rules, 2022 in consultation with the National Financial Reporting Authority (NFRA).
The notification states that these rules shall be applicable from 1 April 2022 and would thus be applicable for the financial year ending 31 March 2023.
The amendments to Ind ASs are intended to keep the Ind ASs aligned with the amendments made in IFRS.
Ind AS 16, "Propert
Mar 31, 2018
(a) Current verus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.
An asset is treated as current when:
- It is expected to be realised or intended to be sold or consumed in the normal operating cycle;
- It is held primarily for the purpose of trading;
- It is expected to be realised within twelve months after the reporting period; or
- A t is a cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
The Company classifies all other assets as noncurrent.
A liability is current when:
- It is expected to be settled in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period; or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Company classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
A he operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle for the purpose of current non-current classification of assets and liabilities.
(b) Revenue recognition
- A evenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured regardless of when the payment is made. Revenue is recognized at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. Revenue is stated inclusive of excise duty and excludes sales tax/ value added tax/ Goods and Service tax. The specific recognition criteria described below must also be met before revenue is recognized.
- Sale of goods: Revenue from sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of consideration received or receivable, net of returns and allowances, trade discounts, volume rebates and cash discounts.
- Rendering of services: Income from services are recognised as and when the services are rendered. Rental income from realty business is recognised based on the contractual terms. In case of revenue sharing arrangements, the income is recognised on the basis of provisional information provided by the lessees where the final data is awaited on the date of revenue recognition.
- A nterest income from debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
- A lean Development Mechanism (âCDMâ) benefits known as Carbon Credit for wind energy units generated and N2O reduction in its Nitric Acid plant are recognised as revenue when the revenue can be reliably measured and there are no significant uncertainties regarding ultimate collection.
- A redits on account of Duty Drawback and other benefits are accounted for on an accrual basis.
- A ividend income is accounted for when the right to receive the dividend is established, which is generally when the shareholders approve the dividend.
(c) Property, plant and equipment
A tems of property, plant and equipment including capital work-in-progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Cost comprises the purchase price and any attributable cost of bring the asset to its working condition for its intended use. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. All other repairs and maintenance costs are recognized in the statement of profit or loss, as incurred. In respect of additions to/ deletions from fixed assets, depreciation is provided on a pro-rata basis with reference to the month of addition/ deletion of the assets. Freehold land is carried at historical cost.
D epreciation on tangible assets is provided on the straight-line method over the useful lives of assets as prescribed in Schedule II of the Companies Act, 2013. As per requirements of the Companies Act, 2013 the Company has also identified significant components of assets and their useful life and depreciation charge is based on an internal technical evaluation. Estimated useful life adopted in respect of the following assets is different from the useful life prescribed in Schedule II of the Companies Act, 2013. These estimated lives are based on technical assessment made by technical expert and management estimates. Management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
C apitalised machinery spares are depreciated over the remaining useful life of the related machinery/ equipment. Leasehold Land is amortised over the lease period.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
(d) Intangible assets
D ntangible assets are initially recognized at cost. Following initial recognition, intangible assets with finite useful life are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in the statement of profit or loss in the period in which the expenditure is incurred.
The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is derecognized.
(e) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset, that necessarily takes a substantial period of time to get ready for its intended use, are capitalised as a part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs. Investment income earned on the temporary investment of specific borrowings is deducted from the borrowing costs eligible for capitalisation.
(f) Foreign currency transactions and balances
Transactions in foreign currency are recorded applying the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currency, remaining unsettled at the end of the year, are translated at the closing rates prevailing on the balance sheet date. Non-monetary items which are carried in terms of historical cost denominated in foreign currency are reported using the exchange rate at the date of the transaction. Exchange differences arising as a result of the above are recognized as income or expenses in the statement of profit and loss. Exchange differences arising on the settlement of monetary items, at rates different from those at which they were initially recorded, during the year or reported in previous financial statements, are recognized as income or expenses in the year in which they arise. Foreign exchange difference on foreign currency borrowings, loans given, settlement gain/ loss and fair value gain/ loss on derivative contract relating to borrowings are accounted and dislosed under finance cost. Such exchange difference do not include foreign exchange difference regarded as an adjustment to the borrowing cost and capitalized with cost of fixed assets.
(g) Financial instruments
Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets: Initial recognition and measurement
Will financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
- Debt instruments at amortised cost
- Debt instruments at fair value through other comprehensive income (FVOCI)
- Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVPL)
- Equity instruments measured at fair value through other comprehensive income (FVOCI)
Debt instruments at amortised cost
A âdebt instrumentâ is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade and other receivables.
Debt instrument at FVOCI
A âdebt instrumentâ is classified as at the FVOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and b) The assetâs contractual cash flows represent SPPI. Debt instruments included within the FVOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the other comprehensive income (OCI). On derecognition of the asset, cumulative gain or loss previously recognized in OCI is reclassified to the Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVPL
TVPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVOCI, is classified as at FVPL. In addition, the Company may elect to designate a debt instrument, which otherwise meets amortised cost or FVOCI criteria, as at FVPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ). Debt instruments included within the FVPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Equity investments
Till equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument by-instrument basis. The classification is made on initial recognition and is irrevocable. If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity. Equity instruments included within the FVPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Investments in subsidiaries and associates
Investments in subsidiaries and associates are carried at cost less impairment as per Ind AS 27 Consolidated and Separate Financial Statements.
A here an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries, the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss.
Impairment of financial assets
A he Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECLs (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised as an impairment gain or loss in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Financial liabilities
financial liabilities are classified and measured at amortised cost or FVPL. A financial liability is classified as at FVPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains and losses, including any interest expense, are recognised in Statement of Profit and Loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in Statement of Profit and Loss. Any gain or loss on derecognition is also recognized in Statement of Profit and Loss.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Derecognition
D financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Derivative financial instruments
The Company uses various types of derivative financial instruments to hedge its currency and interest risk etc. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Offsetting
financial assets and financial liabilities are offset and the net amount presented in the Balance Sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
(h) Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Company as a lessee
D lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. Finance leases are capitalized at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the statement of profit and loss, unless they are directly attributable to qualifying assets in which case they are capitalized in accordance with the Companyâs general policy on borrowing costs. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
Company as a lessor
Deases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from an operating lease is recognized on a straight-line basis over the term of the relevant lease. Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
(i) Inventories
- Saw materials, packing materials and stores and spares are valued at the lower of cost and net realisable value. Cost is determined on the basis of moving weighted average method. The aforesaid items are valued below cost if the finished products in which they are to be incorporated are expected to be sold at a loss.
- finished goods and by-products including those held for captive consumption are valued at the lower of cost or net realisable value. Cost is determined on actual cost basis. Cost of finished goods includes excise duty, as applicable. Variances, exclusive of abnormally low volume and operating performance, are adjused to inventory. Stock-in-trade is valued at lower of cost and net realisable value.
- Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
(j) Impairment of non-financial assets
T he Company assesses at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetsâ recoverable amount. An assetsâ recoverable amount is the higher of an assetâs fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset unless the asset does not generate cashflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and it is written down to its recoverable amount. In assessing value in use, the estimated future cashflows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risk specific to the asset. In determining fair value less cost of disposal, recent market transactions are taken in account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share price for publicly traded entities or other available fair value indicators. For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment loss no longer exist or has decreased. If such indication exists, the Company estimates the assetsâ or CGUâs recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assetsâ recoverable amount, since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit and loss.
(k) Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive), as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursements.
If the effect of time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimates.
(l) Employee benefits
Defined contribution schemes
provident Fund and superannuation are defined contribution schemes. The contributions to the schemes are charged to the statement of profit and loss in the year in which the employee renders the related services.
Defined benefit schemes
The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of continuous service gets a gratuity on post employment at 15 days salary (last drawn salary) for each completed year of service as per the rules of the Company. The aforesaid liability is provided for on the basis of an actuarial valuation based on the projected unit credit method made at the end of the financial year by an independent actuary. The scheme is funded with an Insurance company in the form of qualifying insurance policy.
The defined benefit obligation for post employment pension and medical benefits is also calculated at the end of the financial year by an independent actuary using the projected unit credit method.
T he Company has other long term employee benefits in the nature of leave encashment. The liability in respect of leave encashment is provided for on the basis of an actuarial valuation on the projected unit credit method made at the end of the financial year.
Memeasurements, comprising of actuarial gains and losses, the effect of asset ceiling, excluding amounts included in the net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability) are recognized immediately in the balance sheet with a corresponding debit or credit through OCI in the period in which they occur. Re-measurements are not reclassified to the statement of profit and loss in subsequent periods.
(m) Derivative financial instruments
T he Company uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its foreign currency risks and interest rate risks respectively. Such derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently re-measured at fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship which is designated.
Cash flow hedges that qualify for hedge accounting: The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in âother comprehensive incomeâ in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in the statement of profit and loss. Amounts accumulated in equity are reclassified to the statement of profit and loss in the periods in which the hedged item affects the profit or loss (for example, when the interest expenditure is recorded).
Derivatives that are not designated as hedges: The Company enters into certain derivative contracts to hedge foreign exchange risks which are not designated as hedges. Such derivative contracts are accounted for at each reporting date at fair value through the statement of profit and loss.
(n) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.
(o) Cash dividend
The Company recognizes a liability to make cash distributions to equity shareholders when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorized when it is approved by the shareholders of the company.
(p) Income taxes
Current income tax assets and liabilities are measured at the amounts expected to be recovered from or paid to the taxation authorities in accordance with the Income Tax Act, 1961. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted at the reporting date.
Current income tax relating to items recognized outside profit and loss is recognized outside profit and loss (either in other comprehensive income or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Referred income tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Referred tax liabilities are recognized for all taxable temporary differences except when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or in respect of taxable temporary differences associated with investment in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of temporary differences can be controlled and it is probable that the temporary differences will not reverse in the forseeble future.
Referred tax assets on deductible temporary differences, the carry forward of unused tax credits and any unused tax losses are recognized to the extent that there is reasonably certainty that taxable profits will be available against which the deductible temporary differences and the carry forward of unused tax credits and tax losses can be utilized, except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
The carrying amount of deferred tax assets is reviewed at each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilized. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become reasonably certain that future taxable profits will allow the deferred tax asset to be recovered.
Referred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset or liability is settled based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized outside profit and loss is recognized outside profit and loss (either in other comprehensive income or in equity). Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
Minimum Alternate Tax (MAT)
Minimum Alternate Tax paid as per Indian Income Tax Act, 1961 is in the nature of unused tax credits which can be carried forward and utilized when the Company will pay normal income tax during the specified period. Deferred tax asset on such tax credit is recognized to the extent that it is probable that the unused tax credit can be utilized in the specified future period. The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
(q) Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period. For the purposes of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of equity shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
(r) Investment property
Property that is held for long-term rentals or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the assetâs carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.
(s) Segment reporting
Based on the âManagement approachâ as defined in Ind AS 108: Operating Segments, the Chief Operating Decision Maker evaluates the Companyâs performance and allocates resources based on an analysis of various performance indicators by business segments. Inter-segment sales and transfers are reflected at market prices.
Segment policies
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the standalone financial statements as a whole. Common allocable costs are allocated to each segment on an appropriate basis. Revenues, expenses, assets and liabilities, which are common to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been treated as âunallocated revenues/expenses/ assets/ liabilitiesâ, as the case may be.
(t) Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Company elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquireeâs identifiable net assets. Acquisition-related costs are expensed as incurred.
It the acquisition date, the identifiable assets acquired, and the liabilities assumed are recognised at their acquisition date fair values. For this purpose, the liabilities assumed include contingent liabilities representing present obligation and they are measured at their acquisition fair values irrespective of the fact that outflow of resources embodying economic benefits is not probable. However, the following assets and liabilities acquired in a business combination are measured at the basis indicated below:
- Deferred tax assets or liabilities, and the assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with Ind AS 12 Income Tax and Ind AS 19 Employee Benefits respectively;
- Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Company re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in OCI and accumulated in equity as capital reserve. However, if there is no clear evidence of a bargain purchase, the entity recognises the gain directly in equity as capital reserve, without routing the same through OCI.
(u) Contingent Liability and Contingent Assets
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of economic resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contigent liability but discloses its existence in the standalone financial statements.
contingent asset is not recognized unless it becomes virtually certain that an inflow of economic benefits will arise. When an inflow of economic benefits is probable, contingent assets are disclosed in the standalone financial statements.
Contingent liabilities and contingent assets are reviewed at each balance sheet date.
(v) Government grants
T rants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. Government grants relating to income are deferred and recognised in the Statement of Profit and Loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income.
(w) New Standards issued but yet to be adopted
M inistry of Corporate Affairs (âMCAâ) through Companies (Indian Accounting Standards) Amendment Rules, 2018 has notified the following new Accounting Standards (âInd ASâ) and amendments to Ind ASs which the Company has not applied as they are effective for annual periods beginning on or after April 1, 2018:
Ind AS 115 - Revenue from Contracts with Customers
And AS 115 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Ind AS 115 will supersede the current revenue recognition standard Ind AS 18 Revenue, Ind AS 11 Construction Contracts when it becomes effective.
The core principle of Ind AS 115 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:
- Step 1: Identify the contract(s) with a customer
- Step 2: Identify the performance obligation in the contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contract
- Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under Ind AS 115, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when âcontrolâ of the goods or services underlying the particular performance obligation is transferred to the customer.
The Company is evaluating the impact of this amendment on its financial statements and will apply the standard using the cumulative effective method, with the effect of initially applying IND AS 115 being recognized as an adjustment to the opening balance of retained earnings of the annual reporting period.
Ind AS 21 - The effect of changes in Foreign Exchanges rates
T he amendment has been incorporated in Ind AS 21 as Appendix B, which clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix is applicable for accounting periods beginning on or after April 1, 2018. The appendix explains that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The Company is evaluating the impact of this amendment on its standalone financial statements.
Mar 31, 2017
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated. The standalone financial statements are for the Company consisting of Deepak Fertilisers & Petrochemicals Corporation Limited (the âCompanyâ) and its subsidiaries.
(a) Basis of Preparation:
i. Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
The financial statements up to year ended 31st March, 2016 were prepared in accordance with the accounting standards notified under Companies (Accounting Standard) Rules, 2006 (as amended) and other relevant provisions of the Act.
These financial statements are the first financial statements of the Company under Ind AS. Refer note 51 for an explanation of how the transition from previous GAAP to Ind AS has affected the Companyâs financial position, financial performance and cash flows.
ii. Historical cost convention
The Financial Statements have been prepared on historical cost basis, except the following:
- Certain financial assets and liabilities (including derivative instruments) and contingent consideration that is measured at fair value;
- Assets held for sale - measured at fair value less cost to sell;
- Defined benefit plans - plan assets measured at fair value; and
- Share-based payments
(b) Critical accounting estimates, assumptions and judgments
The preparation of the financial statements requires management to make estimates, assumptions and judgments that affect the reported balances of assets and liabilities and disclosures as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates considering different assumptions and conditions.
Estimates and underlying assumptions are reviewed on an on going basis. Impact on account of revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are discussed below.
Deferred income tax assets and liabilities
Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits.The amount of total deferred tax assets could change if estimates of projected future taxable income or if tax regulations undergo a change.
Useful lives of Property, plant and equipment (âPPEâ)
The Management reviews the estimated useful lives and residual value of PPE at the end of each reporting period.
The factors such as changes in the expected level of usage, number of shifts of production, technological developments and product life-cycle, could significantly impact the economic useful lives and the residual values of these assets. Consequently, the future depreciation charge could be revised and thereby could have an impact on the profit of the future years.
Employee benefit obligations
Employee benefit obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, employee benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Litigation
From time to time, the Company is subject to legal proceedings, the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount of the loss can be reasonably estimated. Significant judgement is made when evaluating, among other factors, the probability of unfavourable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
(d) Foreign currency translation
The financial statements are presented in Indian rupee (INR), which is Deepak Fertilisers and Petrochemicals Corporation Limitedâs functional and presentation currency. On initial recognition, all foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the date of the transaction. As at the reporting date, foreign currency monetary assets and liabilities are translated at the exchange rate prevailing on the Balance Sheet date and the exchange gains or losses are recognised in the Statement of Profit and Loss.
(e) Revenue recognition
- Domestic sales are recognised at the point of dispatch of goods to the customers, which is when substantial risks and rewards of ownership are passed on to the customers, and are stated net of trade discounts, rebates, sales tax, value added tax and excise duty.
- Export sales are recognised based on the shipped on board date as per bill of lading when significant risk and rewards of ownership are transferred to the customer.
- Sales include product subsidy and claims, if any, for reimbursement of cost escalation receivable from Ministry of Agriculture/Ministry of Fertilisers.
- Grants and subsidies from the Government are recognised when there is reasonable certainty of realisation thereof the receipt thereof on the fulfillment of the applicable conditions.
- Revenue in respect of Interest (other than on deposits with banks and others/investments, which are accounted on accrual basis), Insurance claims, Subsidy and reimbursement of cost escalation claimed from Ministry of Agriculture/ Ministry of Fertilisers beyond the notified retention price and price concession on fertilisers pending acceptance of claims by the concerned parties is recognised to the extent the Company is reasonably certain of their ultimate realisation.
- Clean Development Mechanism (CDM) benefits known as Carbon Credit for wind energy units generated and N2O reduction in its Nitric Acid plant are recognised as revenue on the actual realisation of the applicable credits.
- Credits on account of Duty Drawback and other benefits, which are due to be received with reasonable certainty, are accrued upon completion of exports.
- Rental income from realty business is recognised based on the contractual terms. In case of revenue sharing arrangements, the rental income is recognised on the basis of provisional information provided by the lessee where the final data is awaited on the date of revenue recognition.
- Dividend income is accounted for when the right to receive is established.
(f) Income Tax
The income tax expense or credit for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries, branches and associates where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
(g) Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
For arrangements entered into prior to April 1, 2015, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
Company as a lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.
Finance leases are capitalized at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognized as an expense in the Statement of profit and loss on a straight-line basis over the lease term.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
(h) Business Combinations:
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non controlling interests in the acquiree. For each business combination, the Company elects whether to measure the non controlling interests in the acquiree at fair value or at the proportionate share of the acquireeâs identifiable net assets. Acquisition related costs are expensed as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their acquisition date fair values. For this purpose, the liabilities assumed include contingent liabilities representing present obligation and they are measured at their acquisition fair values irrespective of the fact that outflow of resources embodying economic benefits is not probable. However, the following assets and liabilities acquired in a business combination are measured at the basis indicated below:
Deferred tax assets or liabilities, and the assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with Ind AS 12 Income Taxes and Ind AS 19 Employee Benefits respectively.
Liabilities or equity instruments related to share based payment arrangements of the acquiree or share - based payments arrangements of the Company entered into to replace share-based payment arrangements of the acquiree are measured in accordance with Ind AS 102 Share-based Payment at the acquisition date.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Company re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in OCI and accumulated in equity as capital reserve. However, if there is no clear evidence of bargain purchase, the entity recognises the gain directly in equity as capital reserve, without routing the same through OCI.
(i) Impairment of Assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assetâs carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assetâs fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non- financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
(j) Cash and Cash Equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
(k) Trade Receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
(l) Inventories
- Raw materials are valued at lower of moving weighted average cost and net realisable value. However these items are written down to realisable value if the costs of the related finished goods is not expected to recover the cost of raw materials.
- Stores, regular spares, oil, chemicals, catalysts and packing material are valued at moving weighted average cost.
- Cost of inventory of materials is ascertained net of applicable CENVAT/VAT credits.
- Finished goods including those held for captive consumption are valued at lower of factory cost (including depreciation, excise duty payable/paid wherever applicable) or and net realisable value.
- Stock-in-trade is valued at lower of cost and net realisable value.
- Value of Work-in-Process of all products is ignored for the purpose of inventory having regard to the concept of materiality and difficulty of quantifying such stocks with exactitude.
(m) Non-current assets (or disposal groups) held for sale and discontinued operations:
Discontinued operations are reported when a component of an entity is classified as held for disposal or has been disposed of, if the component represents a separate major line of business or geographical area of operations and is part of a single co-ordinated plan to dispose off a separate major line of business or geographical area of operations. In the Standalone Statements of Income, income (loss) from discontinued operations is reported separately from income and expenses from continuing operations and prior periods are presented on a comparable basis.
(n) Investments and other financial assets
(i) Classification
The Company classifies its financial assets in the following measurement categories:
- Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
- Those measured at amortised cost.
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
(ii) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely for payment of principal and interest.
Debt instruments: Subsequent measurement of debt instruments depends on the Companyâs business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
- Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
- Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in other income using the effective interest rate method.
- Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented net in the statement of profit and loss within other gains/(losses) in the period in which it arises. Interest income from these financial assets is included in other income.
Equity instruments: The Company initially records at cost all equity investments and subsequently measures them at fair value. Where the Companyâs management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss. Dividends from such investments are recognised in profit or loss as other income when the Companyâs right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognised in other gain/ (losses) in the statement of profit and loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
(iii) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
(iv) Derecognition of financial assets
A financial asset is derecognised only when
- The Company has transferred the rights to receive cash flows from the financial asset or
- retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
(v) Income recognition:
Interest income: Interest income from debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Dividends: Dividends are recognised in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount of the dividend can be measured reliably.
(o) Derivatives & Hedging:
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
Cash flow hedges that qualify for hedge accounting: The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the other comprehensive income in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, within other gains/(losses).
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the interest expenditure is recorded).
Derivatives that are not designated as hedges:
The Company enters into certain derivative contracts to hedge foreign exchange risks which are not designated as hedges as in case of such transactions, the underlying is re-stated at closing exchange rates. Such contracts are accounted for at fair value through profit or loss and are included in other gains/(losses).
(p) Offsetting financial instruments:
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
(q) Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation methods, estimated useful lives and residual value: Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets as prescribed in Schedule - II of the Companies Act, 2013. As per requirements of the Companies Act, 2013 the Company has also identified significant components of the assets and its useful life based on the internal technical evaluation. Depreciation charge on such components is based on its useful life. Estimated useful life adopted in respect of the following assets is different from the useful life prescribed in Schedule - II of the Companies Act, 2013.
- Depreciation for assets purchased/sold during a period is proportionately charged.
- Depreciation on exchange rate variances capitalised as part of the cost of Fixed Assets, has been provided prospectively over the residual useful life of the assets.
- Capitalised machinery spares are depreciated over remaining useful life of the related machinery/equipment. Costs of such spares are charged to the Statement of Profit and Loss when issued for actual use at written down value.
- Cost of Leasehold Land is amortised over the lease period.
(r) Investment properties:
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the assetâs carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.
Investment properties are depreciated using the straight-line method over their estimated useful lives. Investment properties generally have a useful life of 25-40 years. The useful life has been determined based on technical evaluation performed by the managementâs expert.
(s) Intangible assets:
(i) Goodwill: Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, which in our case are the operating segments.
(t) Trade and other payables:
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 to 60 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost.
(u) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
(v) Borrowing costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
(w) Provisions
Provisions for legal claims, volume discounts and returns are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
(x) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employeesâ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
(ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least 12 months after the reporting period, regardless of when the actual settlement is expected to occur.
(iii) Post-employment obligations
- The Company operates the following post-employment schemes: defined benefit plans such as gratuity, post retirement benefit; and
- defined contribution plans such as provident fund.
Gratuity and retirement benefit obligations
The liability or asset recognised in the balance sheet in respect of defined benefit gratuity and post retirement benefit is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost.
Provident Fund:
The eligible employees of the Company are entitled to receive benefits under the Provident Fund, a defined contribution plan in which both the employees and the Company make monthly contributions at a specified percentage of the covered employeesâ salary (currently 12% of employeesâ salary). The contributions as specified under the law are paid to the Regional Provident Fund Commissioner and the Central Provident Fund under the Pension scheme. The Company recognises such contributions as expense of the year in which the liability is incurred.
Mar 31, 2016
THE COMPANY AND NATURE OF ITS OPERATIONS:
Deepak Fertilizers And Petrochemicals Corporation Limited having corporate office in Pune, Maharashtra, India carries on business in fertilizers, agri services, bulk chemicals, mining chemical and value added real estate. The Company is a public limited company and is listed on the National Stock Exchange of India Limited and The BSE Limited.
Note-1 SIGNIFICANT ACCOUNTING POLICIES
A) Basis for preparation of financial statements
The financial statements are prepared in accordance with the Generally Accepted Accounting Principles (GAAP) in India under the historical cost convention on an accrual basis, and are in conformity with mandatory accounting standards, as prescribed under Section 133 of the Companies Act, 2013 (Act) read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI).
All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. The Company has ascertained its operating cycle as twelve months for the purpose of current and non-current classification of assets and liabilities.
B) Use of estimates
The preparation of the financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes, the useful lives and provision for impairment of fixed assets and intangible assets etc.
The Management believes that the estimates used in the preparation of financial statements are prudent and reasonable. Future results could differ from these estimates.
C) Revenue recognition
- Domestic sales are recognized at the point of dispatch of goods to the customers, which is when substantial risks and rewards of ownership passed to the customers, and are stated net of trade discounts, rebates, sales tax, value added tax and excise duty.
- Export sales are recognized based on the shipped on board date as per bill of lading when significant risk and rewards of ownership are transferred to the customer.
- Sales include product subsidy and claims, if any, for reimbursement of cost escalation receivable from Ministry of Agriculture/Ministry of Fertilizers.
- Revenue in respect of Interest (other than on deposits with banks and others/investments, which are accounted on accrual basis), Insurance claims, Subsidy and reimbursement of cost escalation claimed from Ministry of Agriculture/Ministry of Fertilizers beyond the notified retention price and price concession on Fertilizers pending acceptance of claims by the concerned parties is recognized to the extent the Company is reasonably certain of their ultimate realization.
- Clean Development Mechanism (CDM) benefits known as Carbon Credit for wind energy units generated and N2O reduction in its Nitric Acid plant are recognized as revenue on the actual realization of the applicable credits.
- Credits on account of Duty drawback and other benefits, which are due to be received with reasonable certainty, are accrued upon completion of exports.
- Rental income from realty business is recognized based on the contractual terms. In case of revenue sharing arrangements, the rental income is recognized on the basis of provisional information provided by the lessees where the final data is awaited on the date of revenue recognition.
- Dividend income is accounted for when the right to receive is established.
D) Tangible assets, Intangible assets and Capital work-in-progress
- Fixed Assets (including major modifications/betterments) are recorded at cost of acquisition or construction and other expenditure incidental and related to such acquisition/construction. Tangible fixed assets are stated at original cost net of tax/duty credits availed, if any, less accumulated depreciation and cumulative impairment and those which were revalued are stated at the values determined by the values less accumulated depreciation and cumulative impairment.
- Intangible Assets (Goodwill, Patent, Trademark, Software Licenses etc.) are capitalized at cost of acquisition or development and expenditure incidental and related to such acquisition/development.
- Exchange variation arising from repayment/restatement of the long-term debts/borrowings in foreign currencies for acquisition of fixed assets is capitalized in terms of the option exercised by the Company as per the Ministry of Corporate Affairs (MCA) circular Notification No. G.S.R.378 (E) dated 11th May, 2011 and further amended by pursuant to Circular No. 25/2012 dated 9th August, 2012 issued by MCA.
- Machinery Spares other than those required for regular maintenance are capitalized at cost.
Also refer notes (I) and (K) for capitalization of exchange difference of long term loans and interest on borrowings to acquire qualifying assets.
E) Depreciation and amortization Tangible assets:
- Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets as prescribed in Schedule - II of the Companies Act, 2013. As per requirements of the Companies Act, 2013 the Company has also identified significant components of the assets and its useful life based on the internal technical evaluation. Depreciation charge on such components is based on its useful life. Estimated useful life adopted in respect of the following assets is different from the useful life prescribed in Schedule - II of the Companies Act, 2013.
- Depreciation for assets purchased/sold during a period is proportionately charged.
- Depreciation on exchange rate variances capitalized as part of the cost of Fixed Assets, has been provided prospectively over the residual useful life of the assets.
- Capitalized machinery Spares are depreciated over remaining useful life of the related machinery/equipment. Costs of such spares are charged to the Statement of Profit and Loss when issued for actual use at written down value.
- Cost of Leasehold Land is amortized over the lease period.
Intangible assets:
- Intangible assets are amortized over a period not exceeding 60 months except in the case of right to use of properties which are amortized over a period of effective useful life of such right.
Capital work-in-progress:
- Capital work-in-progress comprises cost of fixed assets that are not yet ready for their intended use at the year end.
Assets taken on operating lease:
- Assets taken on operating lease are recognized in the Statement of Profit and Loss as per the terms of the contract.
Assets given on operating lease:
Assets given on operating lease are recognized as income in the Statement of Profit and Loss as per the terms of the contract.
F) Impairment of assets
The carrying amount of cash generating units/assets is reviewed at Balance Sheet date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount is estimated as the higher of net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. Impairment loss is recognized whenever carrying amount exceeds the recoverable amount. Conversely, previously recognized losses are reversed when the estimated recoverable amount exceeds the carrying amount.
G) Inventories
- Raw materials are valued at lower of moving weighted average cost and net realizable value. However these items are written down to realizable value if the costs of the related finished goods is not expected to recover the cost of raw materials.
- Stores, regular spares, oil, chemicals, catalysts and packing material are valued at moving weighted average cost.
- Cost of inventory of materials is ascertained net of applicable CENVAT/VAT credits.
- Finished goods including those held for captive consumption are valued at lower of factory cost (including depreciation, excise duty payable/paid wherever applicable) or and net realizable value.
- Stock-in-trade is valued at lower of cost and net realizable value.
- Value of Work-in-Process of all products is ignored for the purpose of inventory having regard to the concept of materiality and difficulty of quantifying such stocks with exactitude.
H) Investments
- Long-term (non-current) investments are valued at cost after appropriate adjustment, if necessary, for diminution in their value which are other than temporary in nature.
- Current Investments are stated at lower of cost and fair value.
I) Foreign currency transactions, forward contracts and derivatives
- Transactions in foreign currency are recorded at the rate of exchange prevailing on the dates of the transactions. Foreign currency monetary items are restated at the rate as of the date of Balance Sheet.
- Exchange differences either on settlement or on translation are dealt with in the Statement of Profit and Loss. However exchange differences, arising either on settlement or on translation, in case of long-term borrowings used for acquisition of fixed assets are capitalized.
- In case of forward contracts with underlying assets or liabilities, the difference between the forward rate and the exchange rate on the date of inception of a forward contract is recognized as income or expense and is amortized over the life of the contract. Exchange differences on such contracts are recognized in the Statement of Profit and Loss in the year in which they arise. Any profit or loss arising on cancellation or renewal of forward exchange contracts are recognized as income or expense for the period.
- Wherever the variable interest in respect of External Commercial Borrowings is swapped for fixed interest rates, the fixed interest expense is recognized in the Statement of Profit and Loss.
- The Company has taken option contracts to hedge its currency risks on liabilities in foreign currency. These contracts are Marked to Market (MTM) as at the year end and net loss after considering offsetting effect on the underlying liabilities is charged to Statement of Profit and Loss and capitalized if it is in respect of long-term foreign currency loans taken for acquisition of qualifying assets. Net gain, if any is not recognized.
- Premium on option contracts are amortized and recognized in Statement of Profit and Loss over the period of contract.
J) Employee benefits
- Short-term employee benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the related service is rendered.
Provident fund
- The eligible employees of the Company are entitled to receive benefits under the Provident Fund, a defined contribution plan in which both the employees and the Company make monthly contributions at a specified percentage of the covered employees'' salary (currently 12% of employees'' salary). The contributions as specified under the law are paid to the Regional Provident Fund Commissioner and the Central Provident Fund under the Pension scheme. The Company recognizes such contributions as expense of the year in which the liability is incurred.
Gratuity
- The Company has an obligation towards Gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump sum payments to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 to 30 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The plan is managed by a Trust and the fund is invested with recognized Insurance Companies under their Group Gratuity scheme. The Company makes annual contributions to Gratuity fund and recognizes the liability for Gratuity benefits payable in future based on an independent actuarial valuation.
Superannuation
- The Company has an optional Superannuation Plan for its executives, a defined contribution plan. The Company makes annual contributions at 15% of the covered employees'' salary, subject to maximum of '' 1,00,000 per employee, for the executives opting for the benefit. The plan is managed by a Trust and the funds are invested with recognized Insurance Companies under their Group Superannuation Scheme. Annual contributions as specified under the Trust deed are paid to the Insurance Companies and recognized as an expense of the year in which the liability is incurred.
Compensated absences
- The Company provides for the encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave for a ailment as well as encashment subject to the rules. As per the regular past practice followed by the employees, it is not expected that the entire accumulated leave shall be encased or availed by the employees during the next twelve months and accordingly the benefit is treated as long-term defined benefit. The liability is provided for based on the number of days of unutilized leave at the Balance Sheet date on the basis of an independent actuarial valuation.
Medical Benefits
- The Company has a medical benefit plan according to which employees are entitled to be covered under medic aim policy for the next five years post their superannuation. The amount being insignificant, the liability towards such benefit is recognized based on the actual premium payable.
Post-Retirement Benefits
- The Company has a Post Retirement Benefit plan, which is a defined benefit retirement plan, according to which executives superannuating from the service after ten years of service are eligible for certain benefits like medical, fuel, telephone reimbursement, club membership etc. for specified number of years. The liability is provided for on the basis of an independent actuarial valuation.
K) Borrowing costs
- Borrowing costs that are attributable to the construction/acquisition of qualifying fixed assets are capitalized as a part of the cost of these capitalized assets till the date of completion of physical construction/mechanical completion of the assets. Borrowing costs include exchange differences to the extent treated as finance cost under AS-16 on borrowing cost.
L) Provisions and contingent liabilities
- A provision is made based on a reliable estimate when it is probable that an outflow of resources embodying economic benefits will be required to settle an obligation and in respect of which a reliable estimate can be made. Provision is not discounted and is determined based on best estimate required to settle the obligation at the reporting date.
- Contingent Liabilities are disclosed in respect of:
- Possible obligations that arise from past events but their existence will be confirmed by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company, or
- Any present obligation where it is not probable that an outflow of resources embodying economic benefit will be required to settle obligation or a reliable estimate of the amount of obligation cannot be made.
- However, in situations where the likelihood of an outflow of resources is assessed to be remote, no disclosure is made as such items not in the nature of Contingent liabilities.
- Contingent Assets are not recognized or disclosed in the financial statements.
M) Taxes on Income
- Provision for current tax is made, based on the tax payable under the Income Tax Act, 1961. Minimum Alternative Tax (MAT) credit, which is equal to the excess of MAT (calculated in accordance with provisions of Section 115JB of the Income tax Act, 1961) over normal income-tax is recognized as an asset by crediting the Statement of Profit and Loss only when and to the extent there is convincing evidence that the Company will be able to avail the said credit against normal tax payable during the period of ten succeeding assessment years.
- Deferred tax on timing differences between taxable income and accounting income is accounted for, using the tax rates and the tax laws enacted or substantively enacted as on the balance sheet date. Deferred tax assets on unabsorbed tax losses and unabsorbed tax depreciation are recognized only when there is a virtual certainty of their realization. Other deferred tax assets are recognized only when there is a reasonable certainty of their realization.
N) Cash and cash equivalents
- In the Cash Flow Statement, cash and cash equivalents include cash in hand, demand deposits with banks, with original maturities of three months or less.
O) Earnings per Share
- Basic Earnings per Share is calculated by dividing the net profit or loss for the year attributable to Equity Shareholders by the weighted average number of Equity Shares outstanding during the year. Earnings considered in ascertaining the Company''s earnings per Share is the net profit for the year after deducting preference dividends and any attributable tax thereto for the year. For the purpose of calculating diluted Earnings per Share, the net profit or loss for the year attributable to Equity Shareholders and the weighted average number of Shares outstanding during the year is adjusted for the effects of all dilutive potential Equity Shares.
b) Terms/Rights attached with equity shares
The Company has only one class of issued Equity Shares having at par value of '' 10 per Share. Each holder of Equity Shares is entitled to one vote per Share.
The Company declares and pays dividend in Indian Rupee except in the case of overseas Shareholders where dividend is paid in respective foreign currencies considering foreign exchange rate applied at the date of remittance. The dividend proposed by the Board of Directors is subject to the approval of Shareholders in the ensuring Annual General Meeting.
In the event of liquidation of the Company, the holders of Equity Share will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts in proportion to their shareholding.
Notes:
1. Buyer''s credits are generally due within 180 days and carry variable rate of interest (Average Interest rate for the year
0.94% (0.84%)) and are secured by a first charge by way of hypothecation of stocks of raw materials, stock-in-process, consumable stores and book debts.
2. Short-term loan from bank is repayable on 30th April, 2016 and carries interest rate of 9.45% (9.60%)and is secured by a first charge by way of hypothecation of stocks of raw materials, stock-in-process, consumable stores and book debts.
3. Cash credit is repayable on demand and carries variable interest rate (average interest rate for the year is 9.93 % (10.56%). Cash credit facilities sanctioned by banks including working capital demand loans are secured by a first charge by way of hypothecation of stocks of raw materials, stock-in-process, consumable stores and book debts.
4. Commercial Paper Borrowings carries variable interest rate. Average interest rate for the year is 8.51% (8.89%).
Details of Micro and Small Enterprises as define under MSMED ACT, 2006
To comply with the requirement of The Micro, Small And Medium Enterprises Development Act, 2006, the Company requested its suppliers to confirm it whether they are covered as Micro, Small or Medium enterprise as is defined in the said Act. Based on the communications received from such suppliers confirming their coverage as such enterprise, the Company has recognized them for the necessary treatment as provided under the Act, from the date of receipt of such confirmations and are disclosed in note below.
(#) Rs, 40.22 Lacs (Rs, 34.89 Lacs) transferred to the Investor Education and Protection Fund during the year.
(*) Other payables includes Rs, 1,765.60 Lacs (Rs, 1,191.65 Lacs) related to employees and Rs, 2,875.08 Lacs (Rs, 2,089.05 Lacs) related to sales and marketing expenses.
1. Cost of ''Freehold land includes: .
a. Rs, 3,600 Lacs (Rs, 3,600 Lacs) represented by 24,000 Equity Shares of Rs, 10/- each in a company, which is the legal owner of the land in respect of which the Company has acquired exclusive rights of development.
b. Rs, 2,442.54 Lacs (Rs, 2,442.54 Lacs) represented by 1,41,764 Equity Shares (1,41,764) of Rs, 10/- each in the said company, which is the legal owner of the land on which the Company has been granted the rights of use and occupation by virtue of the shares so held.
2. Buildings include a sum of Rs, 11,398.32 Lacs (Rs, 11,398.32 Lacs) represented by 38,236 (38,236) Equity Shares of Rs, 10/- each in a company which is the legal owner of the buildings in respect of which the Company has an exclusive right of use and occupation by virtue of the shares so held.
3. The above equity shares so held do not really represent financial investments implicitly but rather the means to acquire and hold the properties for use in Companyâs operations. Accordingly the cost of acquisition of the shares is treated as cost of fixed assets and is dealt with in accordance with Accounting Standard - 10 on "Fixed Assetsâ.
4. Gross Block of Plant and Machinery includes Rs, 11,240.90 Lacs (Rs, 10,453.95 Lacs) towards foreign exchange fluctuations on Long-Term Loans .
5. Impairment of Assets: In case there are any indicators of impairment, the Company examines carrying cost of its identified Cash Generating Units (CGU) by comparing present value of estimated future cash flows from such CGUs, in terms of Accounting Standard-28 on Impairment of Assets. Accordingly to which no provision for impairment is required as assets of none of CGUs are impaired during the financial year ended 31st March, 2016.
Sundry debtors includes Rs, 79,476.73 Lacs (Rs, 33,498.73 Lacs) towards fertilizer subsidy receivable from the Government of India. Sundry debtors are net of realization of Rs, 24,250.34 Lacs (Rs, 17,213.03 Lacs ) from short-term finance facility provided by a bank to the Companyâs fertilizer dealers.
* Rs, 1,159.23 Lacs (Rs, 624.94 Lacs) kept as fixed deposit with Bank of Baroda, London, as a lien for ECBs and Rs, Nil (0.20 Lacs) with Sales Tax Authorities.
Note: Raw material consumption figures is derived from purchases and stock variations. Wastages if any is within the tolerable limit and included in above amounts.
During the previous year, the Company had provided depreciation over estimated useful lives of assets as prescribed in Schedule - II of the Companies Act, 2013, or as assessed by the management based on technical evaluation. This had resulted in an additional charge of depreciation amounting to Rs, 1,060.37 Lacs for the year ended 31st March, 2015. The written down value of asset of Rs, 359.17 Lacs as on 1st April, 2014 (net of deferred tax of Rs, 226.45 Lacs) whose residual life was exhausted, had been adjusted against retained earnings.
(@) Foreign exchange fluctuation expenses includes premium on foreign currency derivative contracts of Rs, 2,841.92 Lacs (3,519.93 Lacs). (#) Includes donation to Chief ministers drought relief fund Rs, 5.00 Lacs (Nil) and to a political party, Bhartiya Janta Party Rs, Nil (Rs, 50 Lacs).
The expected contribution is based on same assumptions used to measure the Company''s Gratuity obligations as of 31st March, 2016. The Company is expected to contribute ? 367 Lacs (? 350 Lacs) for the year ended 31st March, 2017.
*Includes customs duty amounting to Rs, 9,347.27 Lacs on duty free import of fertilizer during the period 2005-06 to 2009-10. Under
the applicable policy of Government on subsidy, any customs duty needs to be reimbursed by Government.
b. (i) Effective 15th May, 2014, domestic gas supply to the Company was arbitrarily stopped pursuant to an order passed by
the Ministry of Petroleum and Natural Gas. The Company successfully challenged the same before the Hon''ble Delhi High Court, which by its orders dated 7th July, 2015 (single bench) and 19th October, 2015 directed the Government of India (GOI) to restore the gas supply. Review petition filed by the GOI, challenging the said order, has been rejected by the Court by an order dated 2nd February, 2016. Pursuant to this, GAIL offered to resume gas supply but at higher tariff rate, not matching to the domestic gas prices. As the proposed commercial terms of the offer were not in conformity with the direction of the Honorable Court, the Company has Challenged it before the Court.
(ii) The Department of Fertilizers (DoF), Ministry of Chemicals and Fertilizers, has withheld subsidy of Rs, 79,477 Lacs (net of Rs, 3,516 Lacs released against Bank Guarantee), due to the Company in accordance with applicable Nutrient Based Subsidy (NBS) scheme of GOI, alleging undue gain arising on account of supply of cheap domestic gas. The Company has filed a writ petition before the Honble Bombay High Court, challenging the withholding of subsidy, as being arbitrary and discriminatory. According to the submission made by the (DoF) before the Hon''ble Bombay High Court, formal framework of alleged undue gain is being deliberated and is yet to be notified. The petition is pending before the Court. The Company believes that it has a good case in the matter having regard to the facts and merits of the matter. Accordingly, no provision in the financial statement is considered necessary.
c. The Company has provided Stand by Letter of Credit (SBLC) of Aus $ 37 Lacs during the year to an overseas bank in respect of credit facilities granted by the bank to Platinum Blasting Services Pty. Limited. (Also refer note 40)
Mar 31, 2013
A) Basis for preparation of financial statements
The financial statements have been prepared under historical cost
convention on accrual basis and comply with notified Accounting
Standards as referred to in Section 211(3C) and other relevant
provisions of the Companies Act, 1956. All assets and liabilities have
been classified as current or non-current as per the Company''s normal
operating cycle and other criteria set out in the Revised Schedule VI
to the Companies Act, 1956.
B) Use of estimates
The preparation of the financial statements in conformity with GAAP
requires the management to make estimates and assumptions that affect
the reported balances of assets and liabilities and disclosures
relating to contingent assets and liabilities as at the date of the
financial statements and reported amounts of income and expenses during
the period. Examples of such estimates include provisions for doubtful
debt, future obligations under employee retirement benefit plans,
income tax, the useful lives and provision for impairment of fixed
assets and intangible assets.
The Management believes that the estimates used in the preparation of
financial statements are prudent and reasonable. Future results could
differ from these estimates.
C) Revenue recognition
- Domestic sales are recognised at the point of dispatch of goods to
the customers, which is when substantial risks and rewards of ownership
are passed on to the customers, and are stated net of trade discounts,
rebates, sales tax, value added tax and excise duty.
- Export sales are recognised based on the date of bill of lading.
- Sales include product subsidy and claims, if any, for reimbursement
of cost escalation receivable from Ministry of Agriculture /Ministry of
Fertilisers.
- Grants and subsidies from the Government are recognized when there
is reasonable certainty of realisation of the receipt thereof on the
fulfillment of the applicable conditions.
- Revenue in respect of Interest (other than on deposits with banks
and others/investments, which are accounted on accrual basis),
Insurance claims, subsidy and reimbursement of cost escalation claimed
from Ministry of Agriculture/Ministry of Fertilisers beyond the
notified retention price and price concession on fertilisers pending
acceptance of claims by the concerned parties is recognized to the
extent the Company is reasonably certain of their ultimate realisation.
- Clean Development Mechanism (CDM) benefits known as Carbon Credit
for wind energy units generated and N2O reduction in its Nitric Acid
Plant are recognised as revenue on the actual realisation of the
applicable credits.
- Credits on account of Duty drawback and other benefits, which are
due to be received with reasonable certainty, are accrued upon
completion of exports.
- Rental income from realty business is recognised based on the
contractual terms. In case of revenue sharing arrangements, the rental
income is recognised on the basis of provisional information provided
by the lessees where the final data is awaited on the date of revenue
recognition.
- Dividend income is accounted for when the right to receive is
established.
D) Tangible assets, Intangible assets and Capital work-in-progress
- Fixed assets (including major modifications/betterments) are
recorded at cost of acquisition or construction (including interest/
financial charges, project restructuring cost and other expenditure
incidental and related to such acquisition/construction).
- Intangible Assets (Goodwill, Patent, Trademark, Software Licenses
etc.) are capitalised at cost of acquisition or development and
expenditure incidental and related to such acquisition/ development.
- Exchange variation arising from repayment/restatement of the long
term debts/borrowings in foreign currencies for acquisition of fixed
assets is capitalised in terms of the option exercised by the Company
as per the Ministry of Corporate Affairs (MCA) Notification No.
G.S.R.378 (E) dated 11th May, 2011 and further amended pursuant to
Circular No. 25/2012 dated 9th August, 2012 issued by MCA.
- Machinery Spares other than those required for regular maintenance
are capitalised at cost.
- Relief/Incentive granted by the Government of India by way of
refund of customs duty paid on NP Project imports, is treated as a
special reserve and adjusted against depreciation, over the remaining
useful life of fixed assets of NP Project.
E) Depreciation and amortisation
Tangible assets
- Depreciation is provided on Straight Line basis, except for
relocated DNA-III Plant which is depreciated on Written Down Value
basis.
- Tangible assets, owned by the Company, are depreciated in
accordance with the rates prescribed in Schedule XIV to the Companies
Act, 1956 except in the following cases where higher rates are applied
to the factors of accelerated obsolescence, relocation of plant,
modifications of existing plants etc.
- Depreciation on exchange rate variances are capitalised as a part
of the cost of fixed assets and has been provided prospectively over
the residual useful life of the assets.
- Capitalised machinery spares are depreciated over remaining useful
life of the related machinery/ equipment. Costs of such spares are
charged to the Statement of Profit and Loss when issued for actual use
at written down value.
- Cost of Leasehold Land is amortised over the lease period.
Intangible assets
- Intangible assets are amortised over a period not exceeding 60
months except in the case of right to use of properties which are
amortised over a period of effective useful life of such right.
Capital work-in-progress
- Capital work-in-progress comprises cost of fixed assets that are
not yet ready for their intended use at the year end.
Assets taken on operating lease
- Assets taken on operating lease are recognised in the Statement of
Profit and Loss as per the terms of the contract.
Assets given on operating lease
- Assets given on operating lease are recognised as income in the
Statement of Profit and Loss as per the terms of the contract.
F) Impairment of assets
- The Company assesses at each Balance Sheet date whether there is
any indication that any asset may be impaired. If any such indication
exists, the recoverable amount of the asset is estimated. Impairment
loss is recognised if the carrying value exceeds the recoverable
amount.
G) Inventories
- Raw materials are valued at lower of weighted average cost and net
realisable value. However, these items are considered to be realisable
at cost if the finished products in which they will be used are
expected to be sold at or above cost.
- Stores, regular spares, oil, chemicals, catalysts and packing
materials are valued at moving weighted average cost.
- Cost of inventory of materials is ascertained net of applicable
CENVAT / VAT credits.
- Finished goods including those held for captive consumption are
valued at lower of factory cost (including depreciation and excise duty
payable/paid where applicable but excluding interest cost) and net
realisable value.
- Stock-in-trade is valued at lower of cost and net realisable value.
- Value of work-in-process of all products is ignored for the purpose
of inventory having regard to the concept of materiality and difficulty
of quantifying such stocks with exactitude.
H) Investments
- Long term investments are valued at cost after appropriate
adjustment, if necessary, for diminution in their value which are other
than temporary in nature.
- Current investments are stated at lower of cost or fair value.
I) Foreign currency transactions, forward contracts and derivatives
- Transactions in foreign currency are recorded at the rate of
exchange prevailing on the dates of the transactions. Foreign currency
monetary items are restated at the rate as on the date of Balance
Sheet.
- In case of forward contracts with underlying assets or liabilities,
the difference between the forward rate and the exchange rate on the
date of inception of a forward contract is recognised as income or
expense and is amortised over the life of the contract. Exchange
differences on such contracts are recognised in the Statement of Profit
and Loss in the year in which they arise. Any profit or loss arising on
cancellation or renewal of forward exchange contracts are recognised as
income or expense for the period.
- Exchange differences either on settlement or on translation are
dealt within the Statement of Profit and Loss. However exchange
differences, arising either on settlement or on translation, in case of
long-term borrowings used for acquisition of fixed assets are
capitalised. Wherever the variable interest in respect of External
Commercial Borrowings is swapped for fixed interest rates, the fixed
interest expense is recognised in the Statement of Profit and Loss.
J) Employee benefits
- Short-term employee benefits are recognised as an expense at the
undiscounted amount in the Statement of Profit and Loss of the year in
which the related service is rendered.
Provident fund
- The eligible employees of the Company are entitled to receive
benefits under the Provident Fund, a defined contribution plan in which
both the employees and the Company make monthly contributions at a
specified percentage of the covered employees'' salary (currently 12%
of employees'' salary). The contributions as specified under the law
are paid to the Regional Provident Fund Commissioner and the Central
Provident Fund under the Pension Scheme. The Company recognises such
contributions as expense of the year in which the liability is
incurred.
Gratuity
- The Company has an obligation towards Gratuity, a defined benefit
retirement plan covering eligible employees. The plan provides for a
lump sum payments to vested employees at retirement or death while in
employment or on termination of employment of an amount equivalent to
15 to 30 days salary payable for each completed year of service.
Vesting occurs upon completion of five years of service. The plan is
managed by a Trust and the funds are invested with the Life Insurance
Corporation of India under its Group Gratuity Scheme. The Company makes
annual contributions to the Gratuity Fund and recognises the liability
for Gratuity benefits payable in future based on an independent
actuarial valuation.
Superannuation
- The Company has a Superannuation Plan for its executives, a defined
contribution plan. The Company makes annual contributions at 15% of the
covered employees'' salary. The plan is managed by a Trust and the
funds are invested with the Life Insurance Corporation of India under
its Group Superannuation Scheme.
Annual contributions as specified under the Trust Deed are paid to the
Life Insurance Corporation of India and recognised as an expense of the
year in which the liability is incurred.
Compensated absences
- The Company provides for the encashment of leave or leave with pay
subject to certain rules. The employees are entitled to accumulate
leave for availment as well as encashment subject to the rules. As per
the regular past practice followed by the employees, it is not expected
that the entire accumulated leave shall be encashed or availed by the
employees during the next twelve months and accordingly the benefit is
treated as long term defined benefit. The liability is provided for
based on the number of days of unutilised leave at the Balance Sheet
date on the basis of an independent actuarial valuation.
Wealth creation scheme
- The Company had a Wealth Creation Scheme for its executives, a
defined contribution plan. The Company had been making annual
contributions at 3% of the covered employees'' salary which were then
invested by the Company in approved securities. Subject to Company''s
policy the vested employees are eligible to receive accumulated balance
at retirement or death while in employment or on termination of
employment. Annual contributions made by the Company were recognised as
an expense in the Statement of Profit and Loss in the year of
incurrence of the liability. The Scheme was operational till 31st
March, 2012.
Medical benefits
- The Company has a medical benefit plan according to which employees
are entitled to be covered under mediclaim policy for the next five
years post their superannuation. The amount being insignificant, the
liability towards such benefit is recognised based on the actual
premium payable.
The Company has a retirement policy, a defined benefit retirement plan,
according to which executives superannuating from the service after ten
years of service are eligible for certain benefits like medical, fuel,
telephone reimbursement, club membership etc. for specified number of
years. The liability is provided for on the basis of an independent
actuarial valuation.
K) Borrowing costs
- Borrowing costs that are attributable to the
construction/acquisition of qualifying fixed assets are capitalised as
a part of the cost of these capitalised assets till the date of
completion of physical construction/mechanical completion of the
assets. Borrowing costs includes exchange differences to the extent
treated as finance cost under AS-16 on borrowing cost.
L) Provisions and contingents liabilities
- Contingent liabilities are disclosed in respect of possible
obligations that arise from past events but their existence will be
confirmed by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the Company or where any
present obligation cannot be measured in terms of future outflow of
resources or where a reliable estimate of the obligation cannot be
made.
- A provision is made based on a reliable estimate when it is
probable that an outflow of resources embodying economic benefits will
be required to settle an obligation and in respect of which a reliable
estimate can be made. Provision is not discounted and is determined
based on best estimate required to settle the obligation at the year
end date. Contingent assets are not recognised or disclosed in the
financial statements.
M) Taxes on Income
- Provision for current tax is made based on the tax payable under
the Income Tax Act, 1961. Minimum Alternative Tax (MAT) credit which is
equal to the excess of MAT (calculated in accordance with the
provisions of Section 115JB of the Income Tax Act, 1961) over normal
income tax is recognised as an asset by crediting the Statement of
Profit and Loss only when and to the extent there is convincing
evidence that the Company will be able to avail the said credit against
normal tax payable during the period of ten succeeding assessment
years.
- Deferred tax on timing differences between taxable income and
accounting income is accounted for using the tax rates and the tax laws
enacted or substantively enacted as on the Balance Sheet date. Deferred
tax assets on unabsorbed tax losses and unabsorbed tax depreciation are
recognised only when there is a virtual certainty of their realisation.
Other deferred tax assets are recognised only when there is a
reasonable certainty of their realisation.
N) Cash and cash equivalents
In the Cash Flow Statement, cash and cash equivalents includes cash in
hand, demand deposits with banks with original maturities of three
months or less.
O) Earning per share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to Equity Shareholders by the weighted
average number of Equity Shares outstanding during the period. Earnings
considered in ascertaining the Company''s earning per share is the net
profit for the period after deducting preference dividends and any
attributable tax thereto for the period. For the purpose of calculating
diluted earning per share, the net profit or loss for the period
attributable to Equity Shareholders and the weighted average number of
shares outstanding during the period is adjusted for the effects of all
dilutive potential Equity Shares.
Mar 31, 2012
A) BASIS FOR PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared under historical cost
convention on accrual basis and comply with notified accounting
standards as referred to in Section 211(3C) and other relevant
provisions of the Companies Act, 1956.
B) REVENUE RECOGNITION
- Sales include product subsidy and claims, if any, for reimbursement
of cost escalation receivable from FICC/Ministry of
Agriculture/Ministry of Fertilizers.
- Grants and subsidies from the government are recognized when there
is reasonable assurance of the receipt thereof on the fulfillment of
the applicable conditions.
- Revenue in respect of Interest other than on deposits, Insurance
claims, subsidy and reimbursement of cost escalation claimed from
FICC/Ministry of Agriculture/Ministry of Fertilizers beyond the
notified retention price and price concession on fertilizers, pending
acceptance of claims by the concerned parties is recognized to the
extent the Company is reasonably certain of their ultimate realization.
- Clean Development Mechanism (CDM) benefits known as Carbon Credit
for wind energy units generated and N20 reduction in its Nitric Acid
plant are recognized as revenue on the actual receipts of the
applicable credits and estimated at prevailing realizable values.
- Export benefit in the form of EPCG license is recognized as and
when it is received for the value of the certificate.
- Rental income from realty business is recognized based on the
contractual terms. In case of revenue sharing arrangements, the rental
income is recognized on the basis of provisional information provided
by the lessees where the final data is awaited on the date of revenue
recognition.
C) FIXED ASSETS
- Fixed Assets (including major modifications/betterments) are
recorded at cost of acquisition or construction (including
interest/financial charges, project restructuring cost and other
expenditure incidental and related to such acquisition/ construction).
- Intangible Assets (Goodwill, Patent, Trademark, Software Licenses
etc.) are capitalized at cost of acquisition or development (including
interest/financial charges and expenditure incidental and related to
such acquisition/development).
- Exchange variation arising from repayment/restatement of the
debts/borrowings in foreign currencies for acquisition of fixed assets
is capitalized as per the Accounting Standard-11 as amended by the
Notification No. G.S.R.378 (E) dated 11.05.11.
- Machinery Spares other than those required for regular maintenance
are capitalized at cost.
- Cost of fixed assets, the ownership of which does not vest with the
Company as also expenditure on installation/erection etc. of assets
taken on lease is capitalized.
- Relief/Incentive granted by the Government of India by way of
refund of Customs Duty paid on NP Project imports, is treated as a
special reserve and adjusted against depreciation, over the remaining
useful life of Fixed Assets of NP Project.
- Depreciation on exchange rate variance capitalized as part of the
cost of Fixed Assets upto 31st March, 2012, has been provided
prospectively over the residual useful life of the assets.
- Machinery Spares other than those required for regular maintenance
are capitalized as per Accounting Standard-10 on Fixed Assets and
depreciated over remaining useful life of the related
machinery/equipments. Costs of such spares are charged to Statement of
Profit and Loss when issued for actual use at written down value.
- Cost of Fixed Assets, ownership of which does not vest with the
Company, is amortized over a period of 60 months.
- Intangible assets are amortized over a period not exceeding 60
months except in the case of right to use of properties which are
amortized over the effective useful life of such rights.
- Cost of Leasehold Land is amortized over the lease period.
E) IMPAIRMENT OF ASSETS
The Company assesses at each Balance Sheet date whether there is any
indication that any asset may be impaired. If any such indication
exists, the recoverable amount of the asset is estimated. Impairment
loss is recognized if the carrying value exceeds the recoverable
amount.
F) INVENTORIES
- Inventories of raw materials are valued at lower of moving weighted
average cost, written down to realizable value if the costs of the
related finished goods exceed their net realizable value.
- Inventories of stores, regular spares, oil, chemicals, catalysts
and packing material are valued at moving weighted average cost.
- Inventories of finished goods including those held for captive
consumption are valued at lower of factory cost (including depreciation
but excluding interest) and net realizable value.
- Value of Work-in-Process of all products is ignored for the purpose
of inventory having regard to the concept of materiality and difficulty
of quantifying such stocks with exactitude.
- CENVAT is accounted as per exclusive method of accounting in terms
of Accounting Standard-2 on "Valuation of Inventories".
G) INVESTMENTS
Long term investments are valued at cost after appropriate adjustment,
if necessary, for diminution in their value which are other than
temporary in nature. Current Investments are stated at lower of cost
and fair value.
H) FOREIGN CURRENCY TRANSACTIONS, FORWARD CONTRACTS AND DERIVATIVES
- Transactions in foreign currency are recorded at the rate of
exchange prevailing on the dates of the transactions. Foreign currency
monetary items are restated at the rate as of the date of Balance Sheet
or, as the case may be, at forward contract rates.
- Exchange differences either on settlement or on translation are
dealt with in the Statement of Profit and Loss. However exchange
differences, arising either on settlement or on translation, in case of
borrowings used for acquisition of fixed assets are capitalised.
Wherever the variable interest in respect of External Commercial
Borrowings is swapped for fixed interest rates, the fixed interest
expense is recognized in the accounts.
- The Company uses foreign currency forward contracts to hedge its
actual underlying exposures and not for trading or speculation purpose.
The use of these forward contracts reduces the risk and/or cost to the
Company.
- The outstanding derivative contracts at the Balance Sheet date
other than forward exchange contracts mentioned above are valued by
marking them to market and losses, if any, are recognized in the
Statement of Profit and Loss. For this purpose, the net effect of all
the related streams of cash flows are taken into consideration.
I) EMPLOYEE BENEFITS
- Short-term employee benefits are recognized as an expense at the
undiscounted amount in the Statement of Profit and Loss of the year in
which the related service is rendered.
- The eligible employees of the Company are entitled to receive
benefits under the Provident Fund, a defined contribution plan in which
both the employees and the Company make monthly contributions at a
specified percentage of the covered employees' salary (currently 12% of
employees' salary). The contributions as specified under the law are
paid to the Regional Provident Fund Commissioner and the Central
Provident Fund under the Pension Scheme. The Company recognizes such
contributions as expense of the year in which the liability is
incurred.
- The Company has an obligation towards Gratuity, a defined benefit
retirement plan covering eligible employees. The plan provides for a
lump sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 to 30 days salary payable for each completed year of service.
Vesting occurs upon completion of five years of service. The plan is
managed by a trust and the fund is invested with Life Insurance
Corporation of India under its Group Gratuity Scheme. The Company makes
annual contributions to Gratuity Fund and the Company recognizes the
liability for Gratuity benefits payable in future based on an
independent actuarial valuation.
- The Company has a Superannuation Plan for its executives - a
defined contribution plan. The Company makes annual contributions at
15% of the covered employees' salary. The plan is managed by a trust
and fund is invested with Life Insurance Corporation of India under its
Group Superannuation Scheme. The contributions as specified under the
trust deed are paid to the Life Insurance Corporation of India. The
Company is liable for annual contributions and recognizes such
contributions as an expense of the year in which the liability is
incurred.
- The Company provides for the encashment of leave or leave with pay
subject to certain rules. The employees are entitled to accumulate
leave for a ailment as well as encashment subject to the rules. As per
the regular past practice followed by the employees, it is not expected
that the entire accumulated leave shall be encased or availed by the
employees during the next twelve months and accordingly the benefit is
treated as long term defined benefit. The liability is provided for
based on the number of days of unutilized leave at the Balance Sheet
date on the basis of an independent actuarial valuation.
- The Company has a Wealth Creation Scheme for its executives - a
defined contribution plan. The Company makes annual contributions at 3%
of the covered employees' salary which are then invested by the Company
in securities. Subject to Company's Policy the vested employees are
eligible to receive accumulated balance at retirement, death while in
employment or on termination of employment. The Company is liable for
annual contributions and recognizes such contributions as an expense of
the year in which the liability is incurred.
- The Company has a medical benefit plan according to which employees
are entitled to be covered under medic aim policy for the next five
years post their superannuation. The amount being insignificant, the
liability towards such benefit is recognized based on the actual
premium payable.
- The Company has a retirement policy, a defined benefit retirement
plan, according to which executives superannuating from the service
after ten years of service are eligible for certain benefits like
medical, fuel, telephone reimbursement, club membership etc. for
specified number of years. The liability is provided for on the basis
of an independent actuarial valuation.
J) BORROWING COST
- Borrowing cost on working capital is charged against the
profit/loss for year in which it is incurred.
- Borrowing costs that are attributable to the construction/acquisition
of fixed assets are capitalised as a part of the cost of these
capitalized assets till the date of completion of physical
construction/mechanical completion of the assets.
- Borrowing costs that are attributable to the
development/acquisition of intangible assets are capitalized till the
date of use.
K) PRIOR PERIOD ITEMS
Significant items of Income and Expenditure which relate to prior
accounting periods, are accounted in the Statement of Profit and Loss
under the head "Prior Years' Adjustments" other than those occasioned
by events occurring during or after the close of the year and which are
treated as relatable to the current year.
L) CONTINGENT LIABILITIES
Contingent Liabilities as defined in Accounting Standard-29 are
disclosed by way of notes to accounts. Provision is made if it becomes
probable that an outflow of future economic benefits will be required
for an item previously dealt with as a contingent liability.
M) TAXES ON INCOME
Current tax is determined as the amount of tax payable in respect of
taxable income for the period. Deferred tax is recognized, subject to
the consideration of prudence in respect of deferred tax assets, on
timing differences, being the differences between ' taxable income and
accounting income that originate in one period and are capable of
reversal in one or more subsequent periods. For this purpose, deferred
tax liabilities and assets are reckoned on net basis, after inter-se
set-off, for each component of the timing differences.
Mar 31, 2011
A) BASIS FOR PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared under historical cost
convention on accrual basis and comply with notified accounting
standards as referred to in Section 211(3C) and other relevant
provisions of the Companies Act, 1956.
B) REVENUE RECOGNITION
. Sales include product subsidy and claims, if any, for reimbursement
of cost escalation receivable from FICC/ Ministry of
Agriculture/Ministry of Fertilisers.
. Grants and subsidies from the government are recognized when there is
reasonable assurance of the receipt thereof on the fulfilment of the
applicable conditions.
. Revenue in respect of Interest other than on deposits, Insurance
claims, Subsidy and Reimbursement of cost escalation claimed from
FICC/Ministry of Agriculture/Ministry of Fertilisers beyond the
notified Retention Price and Price Concession on fertilisers, pending
acceptance of claims by the concerned parties is recognised to the
extent the Company is reasonably certain of their ultimate realisation.
. Clean Development Mechanism (CDM) benefits known as Carbon Credit for
wind energy units generated and N20 reduction in its Nitric Acid plant
are recognized as revenue on the actual receipts of the applicable
credits and estimated at prevailing realisable values.
. Export benefit in the form of EPCG licence is recognized as and when
it is received for the value of the certificate.
. Rental income from realty business is recognized based on the
contractual terms. In case of revenue sharing arrangements, the rental
income is recognized on the basis of provisional information provided
by the lessees where the final data is awaited on the date of revenue
recognition.
C) FIXED ASSETS
. Fixed Assets (including major modifications/betterments) are recorded
at cost of acquisition or construction (including interest/financial
charges, project restructuring cost and other expenditure incidental
and related to such acquisition/construction).
. Intangible Assets (Goodwill, Patent, Trademark, Software Licenses
etc.) are capitalised at cost of acquisition or development (including
interest/financial charges and expenditure incidental and related to
such acquisition/ development).
. Exchange variation arising from repayment/restatement of the
debts/borrowings in foreign currencies for acquisition of fixed assets
is capitalized as per the Accounting Standard 11 as amended by the
Notification No. G.S.R.225 (E) dated 31.03.09.
. Machinery Spares other than those required for regular maintenance
are capitalised at cost.
. Cost of fixed assets, the ownership of which does not vest with the
Company as also expenditure on installation/ erection etc. of assets
taken on lease is capitalised.
. Relief/Incentive granted by the Government of India by way of refund
of Customs Duty paid on NP Project imports, is treated as a special
reserve and adjusted against depreciation, over the remaining useful
life of Fixed Assets of NP Project.
D) DEPRECIATION
. Depreciation is provided by Straight Line Method, except for
relocated DNA-III Plant which is depreciated by Written Down Value
method.
. Tangible assets, owned by the Company, are depreciated in accordance
with the rates prescribed in Schedule XIV to the Companies Act, 1956
except in the following cases where higher rates are applied to the
factors of accelerated obsolescence, relocation of plant, modifications
of existing plants etc.
. Depreciation on exchange rate variance capitalised as part of the
cost of Fixed Assets upto 31st March, 2011, has been provided
prospectively over the residual useful life of the assets.
. Machinery Spares other than those required for regular maintenance
are capitalised as per Accounting Standard- 10 on Fixed Assets and
depreciated over remaining useful life of the related
machinery/equipments. Costs of such spares are charged to Profit and
Loss Account when issued for actual use at written down value.
. Cost of Fixed Assets, ownership of which does not vest with the
Company, is amortised over a period of 60 months.
. Intangible assets are amortised over a period not exceeding 60 months
except in the case of right to use of properties which are ammortised
over the effective useful life of such rights.
. Cost of Leasehold Land is amortised over the lease period.
E) IMPAIRMENT OF ASSETS
The Company assesses at each Balance Sheet date whether there is any
indication that any asset may be impaired. If any such indication
exists, the recoverable amount of the asset is estimated. Impairment
loss is recognised if the carrying value exceeds the recoverable
amount.
F) INVENTORIES
. Inventories of raw materials are valued at lower of moving weighted
average cost, written down to realisable value if the costs of the
related finished goods exceed their net realisable value.
. Inventories of stores, regular spares, oil, chemicals, catalysts and
packing material are valued at moving weighted average cost.
. Inventories of finished goods including those held for captive
consumption are valued at lower of factory cost (including depreciation
but excluding interest) and net realisable value.
. Value of Work-in-Process of all products is ignored for the purpose
of inventory having regard to the concept of materiality and difficulty
of quantifying such stocks with exactitude.
. CENVAT is accounted as per exclusive method of accounting in terms of
Accounting Standard (AS)-2 on "Valuation of Inventories".
6) INVESTMENTS
Long term investments are valued at cost after appropriate adjustment,
if necessary, for diminution in their value which are other than
temporary in nature. Current Investments are stated at lower of cost
and fair value.
H) FOREIGN CURRENCY TRANSACTIONS, FORWARD CONTRACTS AND DERIVATIVES
. Transactions in foreign currency are recorded at the rate of exchange
prevailing on the dates of the transactions. Foreign currency monetary
items are restated at the rate as of the date of Balance Sheet or, as
the case may be, at forward contract rates.
. Exchange differences either on settlement or on translation are dealt
with in the Profit and Loss Account. However exchange differences,
arising either on settlement or on translation, in case of borrowings
used for acquisition of fixed assets are capitalised.
. Wherever the variable interest in respect of External Commercial
Borrowings is swapped for fixed interest rates, the fixed interest
expense is recognised in the accounts.
. The Company uses foreign currency forward contracts to hedge its
actual underlying exposures and not for trading or speculation purpose.
The use of these forward contracts reduces the risk and/or cost to the
Company.
. The outstanding derivative contracts at the Balance Sheet date other
than forward exchange contracts mentioned above are valued by marking
them to market and losses, if any, are recognised in the Profit and
Loss Account. For this purpose, the net effect of all the related
streams of cash flows are taken into consideration.
I) EMPLOYEE BENEFITS
. Short-term employee benefits are recognised as an expense at the
undiscounted amount in the Profit and Loss Account of the year in which
the related service is rendered.
. The eligible employees of the Company are entitled to receive
benefits under the Provident Fund, a defined contribution plan in which
both the employees and the Company make monthly contributions at a
specified percentage of the covered employees salary (currently 12% of
employees salary). The contributions as specified under the law are
paid to the Regional Provident Fund Commissioner and the Central
Provident Fund under the Pension scheme. The Company recognises such
contributions as expense of the year in which the liability is
incurred.
. The Company has an obligation towards Gratuity, a defined benefit
retirement plan covering eligible employees. The plan provides for a
lump sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 to 30 days salary payable for each completed year of service.
Vesting occurs upon completion of five years of service. The plan is
managed by a trust and the fund is invested with Life Insurance
Corporation of India under its Group Gratuity Scheme. The Company makes
annual contributions to gratuity fund and the Company recognises the
liability for Gratuity benefits payable in future based on an
independent actuarial valuation.
. The Company has a Superannuation Plan for its executives - a defined
contribution plan. The Company makes annual contributions at 15% of the
covered employees salary. The plan is managed by a trust and fund is
invested with Life Insurance Corporation of India under its Group
Superannuation Scheme. The contributions as specified under the trust
deed are paid to the Life Insurance Corporation of India. The Company
is liable for annual contributions and recognises such contributions as
an expense of the year in which the liability is incurred.
. The Company provides for the encashment of leave or leave with pay
subject to certain rules. The employees are entitled to accumulate
leave for availment as well as encashment subject to the rules. As per
the regular past practice followed by the employees, it is not expected
that the entire accumulated leave shall be encashed or availed by the
employees during the next twelve months and accordingly the benefit is
treated as long term defined benefit. The liability is provided for
based on the number of days of unutilised leave at the Balance Sheet
date on the basis of an independent actuarial valuation.
. The Company has a Wealth Creation Scheme for its executives - a
defined contribution plan. The Company makes annual contributions at 3%
of the covered employees salary which are then invested by the Company
in securities. Subject to Companys Policy the vested employees are
eligible to receive accumulated balance at retirement, death while in
employment or on termination of employment. The Company is liable for
annual contributions and recognises such contributions as an expense of
the year in which the liability is incurred.
. The Company has a medical benefit plan according to which employees
are entitled to be covered under mediclaim policy for the next five
years post their superannuation. The amount being insignificant, the
liability towards such benefit is recognised based on the actual
premium payable.
J) BORROWING COST
. Borrowing cost on working capital is charged against the profit/loss
for year in which it is incurred.
. Borrowing costs that are attributable to the construction/acquisition
of fixed assets are capitalised as a part of the cost of these
capitalised assets till the date of completion of physical
construction/mechanical completion of the assets.
. Borrowing costs that are attributable to the development/acquisition
of intangible asset are capitalised till the date of use.
K) PRIOR PERIOD ITEMS
Significant items of Income and Expenditure which relate to prior
accounting periods, are accounted in the Profit and Loss Account under
the head "Prior Years Adjustments" other than those occasioned by
events occurring during or after the close of the year and which are
treated as relatable to the current year.
L) CONTINGENT LIABILITIES
Contingent Liabilities as defined in Accounting Standard-29 are
disclosed by way of notes to accounts. Provision is made if it becomes
probable that an outflow of future economic benefits will be required
for an item previously dealt with as a contingent liability.
M) TAXES ON INCOME
Current tax is determined as the amount of tax payable in respect of
taxable income for the period. Deferred tax is recognised, subject to
the consideration of prudence in respect of deferred tax assets, on
timing differences, being the differences between taxable income and
accounting income that originate in one period and are capable of
reversal in one or more subsequent periods. For this purpose, deferred
tax liabilities and assets are reckoned on net basis, after inter-se
set-off, for each component of the timing differences.
Mar 31, 2010
A) Basis of preparation of financial statements
The financial statements are prepared under historical cost convention
on the accrual basis of accounting and in accordance with accounting
principles generally accepted in India.
bj Management estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in India requires the Management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses during
the reported period.The Management believes that the estimates used in
preparation of the financialstatements are prudent and reasonable.
Future results could differ from these estimates.
c) Fixed Assets:
Fixed assets are carried at cost of acquisition or construction and
include amounts added on revaluation, less accumulated depreciation and
impairment loss.
d) Depreciation/Amortisation:
1. In respect of fixed assets revalued, depreciation is provided on
the basis of useful life of assets as estimated by the external valuers
or that calculated on original cost whichever is higher.
2. Depreciation on other fixed assets has been provided in the
accounts at the rates and in the manner specified in Schedule XIV to
the Companies Act, 1956 as under:
i. Sheet Metal Divisions (Honda, Bhuimpal, Jejuri) : On Written Down
Value Method in respect of buildings, furniture and fixtures and
vehicles and on Straight Line Method in respect of plant and machinery.
ii. Bus Body Division: On straight line method.
3. Cost of leasehold land is amortised over the period of lease.
ej Impairment Loss:
Impairment loss is provided to the extent the carrying amount of assets
exceeds their recoverable amount. Recoverable amount is the higher of
an assets net selling price and its value in use. Value in use is the
present value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from the sale
of the asset in an arms length transaction between knowledgeable,
willing parties, less the cost of disposal.
f) Intangible Assets
Intangible assets are stated ar cost less accumulated amortisation.
Computer software is amortised over a period of four years.
g) Investments:
Current investments are carried at lower of cost and fair value. Long
Term investments are carried at cost However when there is a decline,
other than temporary, the carrying amount is reduced to recognise the
decline.
h) Inventories:
Items of inventory are valued on the basis given below: Ã
i. Raw material :at cost or net realisable value, whichever is lower.
Cost is determined by the Weighted Average Method.
ii. Components, Stores and Spares: at cost or net realisable value,
whichever is lower. Cost is determined by the Weighted Average Method (
Refer note 27 of Schedule 14)
iii. Work in process and Finished goods: at cost or net realisable
value, whichever is lower. Cost is determined on the basis of
absorption costing.
iv. Scrap: at net realisable value.
i) Employee Benefits:
i) Gratuity
The Company has an obligation towards gratuity, a defined benefit
retirement plan covering eligible employees. The plan provides for lump
sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 to 30 days salary payable for each completed year of service.
Vesting occurs upon completion of five years of service. The company
has obtained insurance policy with Life Insurance Corporation of India
The company accounts for the Bability for gratuity benefits payable in
future based on an independent actuarial valuation, carried out as at
the year end.
ii) Superannuation
The company has a Superannuation plan (defined contribution plan) .The
Company maintains separate irrevocable trust for employees covered and
entitled to benefits. The company has obtained insurance policy with
Life Insurance Corporation of India. The company contributes) 5% of
eligible employees salary to the trust every year. The company
recognizes such contributions as an expense when incurred. The company
has no further obligation beyond this contribution
Hi) Provident Fund
The eligible, employees of the Company are entitled to receive benefits
under the provident fund, a defined contribution plan, in which both
employees and the company make monthly contributions at a specified
percentage of the covered employees salary ( currently 12% of
employees salary j.The contributions as specified under the law are
paid to the provident fund trust. Contribution towards Pension fund is
paid to the Regional Provident fund commissioner at specified
percentage of the covered employees salary on monthly basis.
iv) Compensated absences
The company provides for the encashment of leave or leave with pay
subject to certain rules. The employees are entitled to accumulate
leave subject to certain limits, for future encashment. The liability
is provided based on the number of days of unutilized leave at each
balance sheet date on the basis of an independent actuarial valuation,
carried out as at the year end.
v) Actuarial gains and losses
The actuarial gains and losses are recognised immediately in the
statement of profit and loss.
jj Accounting of Cenvai Credit;
Cenvat credit is accounted as per actual credit availed in the Excise
records, on receipt of materials.
k) Foreign Currency Transactions:
Transactions in foreign currency eve recorded at the original rates of
exchange in force at the time the transactions are effected. At the
year-end, monetary items denominated in foreign currency are reported
using the closing rates of exchange. Exchange differences arising
thereon and on realisation / payments of foreign exchange are accounted
as income or expense in the relevant year.
I) Revenue recognition:
Revenue (income) is recognised when no significant uncertainty as to
measurability or collectibility exists.
m) Borrowing costs:
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes a
substantial period of time to get ready for its intended use. All other
borrowing costs are charged to revenue.
nj Leases
Assets acquired on leases where significant portions of the risks and
rewards incidental 1o ownership are retained by the lessors are
classified as operating leases. Lease rentals are charged to the profit
& loss account on accrual basis.
Rentals received on assets given on operating leases are recognised as
income in the profit and loss account on straight-line basis over the
period of the lease as per the terms of agreement.
oj SEGMENTAL ACCOUNTING
The following accounting policies have been followed for segment
reporting:
Segment Revenue includes Sales and other income directly identifiable
with / allocable to the segment.
Expenses that are directly identifiable with / allocable to segments
are considered for determining the Segment Results. The expenses which
relate to the Company as a whole and not allocable to segments are
included under Unallocable expenses.
Segment assets and liabilities include those directly identifiable with
the respective segments. Unallocable corporate assets and liabilities
represent the assets and liabilities that relate to the Company as a
whole and not allocable to any segment. Unallocated assets mainly
comprise Cash and Bank balances.
Unallocable liabilities include Deferred tax. Secured loans. Provision
for tax (net of advance payment of taxes) and Other liabilities.
p) Fringe Benefit Tax:
Provision for Fringe Bejiefit Tax is made in accordance with Chapter
Xll-H of the Income Tax Act, 1961.
q) Taxes on Income:
Tax expense comprise both current tax and deferred tax at the
applicable enacted/ substantively enacted rates. Current tax represents
the amount of income tax payable / recoverable in respect of taxable
income / loss for the reporting period. Deferred tax represents the
effect of timing differences between taxable income and accounting
income for the reporting period that originate in one period and are
capable of reversal in one or more subsequent periods.
r) Product Warranty Expenses
The estimated liability for product warranties is recorded when
products are sold. These estimates are established using historical
information on the nature, frequency and average cost of warranty
claims.
s) Provisions and contingencies:
A provision is recognised where the Company has a legal and
constructive obligation as a result of a past event, for which it is
probable that cash outflow will be required and a reliable estimate can
be made of the amount of the obligation. A Contingent liability is
disclosed when the Company has a possible or present obligation where
it is not probable that an outflow of resources will be required to
settle it. Contingent assets are neither recognised nor disclosed.
t) Government Grants:
Grants related to specific Fixed Assets are disclosed as a deduction
from the value of concerned Assets. Grants related to revenue are
credited to the Profit and Loss Account. Grants in the nature of
promoters contribution are treated as Capital Reserve.
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